Debt help organisations have welcomed the news that the government's Insolvency Service's Working Party has recommended a reform to the process of applying for Individual Voluntary Arrangements (IVAs).
IVAs are a viable alternative to bankruptcy for those faced with uncontrollable debt levels. It involves reaching an agreement with several different creditors to pay off a debt gradually, on a monthly basis.
Under the current legislation, however, 75 per cent of the creditors involved have to agree to an arrangement for it to go ahead.
The new recommendation is that this will be reduced to majority approval (over 50 per cent) for people owing debts of up to £75,000.
Research by debt solutions firm One Advice reveals that approximately 203,000 people could decide to declare bankruptcy this year.
However, many of these could apply for IVAs as an alternative way of dealing with their debt.
Earlier this year the UK's collective personal debt pile topped £1.1 trillion, causing the Financial Services Authority (FSA) to issue an official statement warning of signs of "growing distress" in consumers.
This amassed debt includes credit cards, personal loans and overdrafts on bank accounts, as well as mortgages.
Chris Holmes, One Advice chief executive, said: "If these recommendations become law many more people would benefit from having an IVA." To read more about loans, please click here.
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