The government is preparing new plans to simplify the process of applying for Individual Voluntary Agreements (IVAs).
IVAs are an effective alternative to bankruptcy for people with unsustainable level of debt, allowing borrowers to pay off some of what they owe under agreement with their creditors.
As the numbers applying for bankruptcy reach record levels, the government is finalising a scheme to simplify and speed up the application process to make it more attractive.
Under the current system, creditors responsible for 75 per cent of a debt have to agree to an IVA.
This is expected to fall to 51 per cent for those who owe less than £75,000 in unsecured lending and homeowner loans.
The application process itself will also be standardised. The government is expected to release the plan by the end of the month and have it on the law books by the end of the year.
The original system of IVAs was first passed in 1986, but their popularity has exploded over the past year as heavily indebted consumers have attempted to cope with their debts.
The government will also be hoping that changing the system will help ease the number of people currently applying for bankruptcy.
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