Past Articles for the IVAs Category

A total of around £25 billion worth of unsecured personal debt that may not be paid back is currently outstanding in the UK, it has been claimed.

Research by the credit risk management group TDX has shown that there are around one million people in a precarious financial situation and the bulk of the arrears is believed to be accounted for by credit card debt.

As a result of these issues and the ongoing economic downturn, the group has also estimated that there will be almost twice as many people entering an Individual Voluntary Arrangement (IVA) this year than was the case in 2007.

TDX’s analysts concluded that “A slowdown in house prices and an increase in personal inflation, which offsets any relief from interest rate reductions, will lead to an increase in the number of people in financial difficulty.”

Accountancy firm Grant Thornton predicted earlier this year that around 110,000 British consumers would enter an IVA in 2008.

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The credit crunch that has been causing turmoil in financial markets around the world is about to hit home with consumers in the UK, it has been suggested.

According to the Guardian’s economic expert Deborah Hargreaves, the problems that have been giving financiers nightmares will become a painful reality for thousands of families in weeks to come.

The practices of lenders in recent years has been singled out by Ms Hargreaves as being among the major reasons why millions of people are struggling to become debt free and why they are so vulnerable to an economic downturn.

Ms Hargreaves commented: “The financial engineering of recent years enabled banks to lend ever-increasing amounts since they were able to offload debts from their balance sheets.”

“The banks’ easy lending practices fostered a debt-dependant culture,” she added.

Accountancy firm Grant Thornton expects to see around 10,000 Britons enter insolvency every month this year as the impact of the credit crunch is felt across the country.

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The rate at which Welsh consumers are resorting to Individual Voluntary Arrangements (IVAs) is increasing dramatically, according to the latest data from the Insolvency Service.

Since 2000, the number of people in Wales entering an IVA on an annual basis has risen by as much as 446 per cent and bankruptcies have increased by 168 per cent during the same period.

In response to these findings, the Liberal Democrat MP for Cardiff Jenny Willott suggested that more needs to be done to raise “financial literacy” rates among people living in Wales and that prime minister Gordon Brown has to take responsibility for the scale of the current problem.

“Now that the economy starting to slow, high interest rates are hitting an increasing number of Welsh families who have borrowed heavily to meet the rising cost of living and spiralling house prices,” said Ms Willott.

“This is the seventh consecutive year that the number of bankruptcies and IVAs in Wales has grown.”

Earlier this month, the Bank of England opted not to reduce the base rate of interest having done so by a quarter-point in February.

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It looks like Cleardebt, and our clients and website users, may have played a part in changing banks, credit card and loan companies’ attitudes to IVAs for the better. Last year the following public petition was posted on the Downing Street website.

“We the undersigned petition the Prime Minister to Bring about a fair balance between the rights and responsibilities of consumer debtors and their bank and financial institution creditors, and enable as many people in debt as reasonably possible to have fair access to the full benefits of insolvency legislation by bringing in a) legislation to enforce the Banking Code and b) at least until that is in place, relaxed best practice requirements in relation to the IVA personal insolvency procedure to take account of the bank’s present actions.”

The petition got 553 signatures and, whilst we can’t be sure, it looks as if around 400 of them came from people who followed links from our email newsletter.

If you were one of those who signed, then we think you played a part in helping put pressure on lenders to support IVA reforms which should ensure more people get the debt resolution they need in 2008. Here’s the prime minister’s office’s response (posted to their website on 29th February 2008):

“The Government is fully committed to ensuring that individuals in financial difficulty are able to deal with their debts, whether through formal statutory procedures such as bankruptcy or IVA, or informal debt management processes. This in itself recognises that there must be a fair balance between rights and responsibilities of debtors and creditors.

In terms of IVAs, the Government has sought to apply legislative change where improvements could best be achieved in that way. The proposed introduction of Simple Individual Voluntary Arrangements is an example of this. However, at the same time it recognises that it is better in many cases to seek agreement between the various parties as to how insolvency procedures should work in practice, within the legal framework.

To this end a draft protocol was finalised and agreed at a forum held on 29 January 2008, and took effect from 1 February 2008. The protocol makes it clear what is expected of both creditors and debtors and removes some of the uncertainty about what constitutes best practice within the IVA process.

The presentation to delegates at the forum and a full copy of the protocol and associated documents can be found on the Insolvency Service website.”

Source: http://www.pm.gov.uk/output/Page14797.asp

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As many as seven million British consumers are struggling to meet their debt repayment commitments, according to recent research.

Figures compiled on behalf of accountancy firm KPMG show that almost one in four people around the country find it difficult to pay off the debts they owe to creditor on a monthly basis.

Additionally, a recent poll by YouGov established that close to 11 million people are convinced that their debt problems are likely to worsen over the next few months.

In light of the latest data on the UK’s debt management woes, the company has reiterated its prediction that a record number of Britons will enter an Individual Voluntary Arrangement (IVA) or file for bankruptcy this year.

“Those people who have been robbing Peter to pay Paul, transferring balances from card to card, re-mortgaging and taking equity out of their property to pay off spiraling debt are fast running out of options,” said Steve Treherne, a personal insolvency practitioner at KPMG.

ClearDebt recently asserted that an agreement on protocols between the Insolvency Service, the British Bankers’ Association and debt solution firms is likely to resulting more IVAs being entered in 2008 than was the case last year.

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The number of people in the UK who opt to enter Individual Voluntary Arrangement (IVA) will increase over the course of 2008, it has been claimed.

According to debt solution provider ClearDebt, an agreement on relevant protocols between the Insolvency Service, the British Bankers’ Association and IVA companies will see insolvency rates rise in months to come.

Many consumers have been denied the option of entering an IVA in recent months and ClearDebt is convinced that the newly-introduced insolvency protocols will make the process easier for all those involved.

“We are confident that the IVA level will pick up,” said David Mond, ClearDebt’s chief executive.

“The agreement… [will] remove the artificial hurdles that some member banks of the BBA have imposed on IVA proposals.”

In response to government figures that showed insolvency rates fell in the UK in the fourth quarter of last year, accountancy firm Grant Thornton asserted that an increasing number of Britons are likely to enter bankruptcy and IVAs in the early part of 2008.

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Creditors were to blame for the fall in the number of people entering an Individual Voluntary Arrangement (IVA) last year, according to David Mond, chief executive of ClearDebt.

Mr Mond is convinced that thousands of consumers have been denied access to an IVA as a means of a debt solution by lenders that have been unwilling even to asses their case.

The stance of creditors around the county amounts to widespread “intransigence” that has left many people in the UK facing insurmountable debt management problems, he went in to suggest.

” Individual Voluntary Arrangements (IVAs) have fallen again for one very simple reason: there are creditors and creditor’s agents out there who have taken the unilateral choice to reject Individual Voluntary Arrangements (IVAs) no matter what the case in hand offers,” said Mr Mond.

Official figures from the Insolvency Service showed that the number of people who entered an IVA last year was 4.9 per cent down on the same data for the previous year.

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The Conservative Party has blamed prime minister Gordon Brown for the rising level of personal bankruptcy in the UK, it has emerged.

According to the Tories, it has been Mr Brown’s lack of competent management of the economy that has seen increasing numbers of people around the country enter
bankruptcy in an effort to solve their debt management problems.

In fact, the opposition party has described the economic issues that are now having a serious impact on the personal finances of thousands of consumers as chickens “coming home to roost”.

“For ten years, Gordon Brown fuelled Britain’s economy with easy credit and public borrowing. On his watch, personal debt has soared to more than £1 trillion,” said shadow chief secretary to the Treasury, Philip Hammond.

“Personal bankruptcy is the tragic price many are paying for Gordon Brown’s economic incompetence.”

Meanwhile, the accountancy firm Grant Thornton has described the latest personal insolvency figures for the UK as being the “tip of the iceberg” in terms of the country’s overall debt problems.

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The latest figures showing insolvency rates in the UK only demonstrate the tip of the iceberg that is the country’s debt management issues, it has been claimed.

During the fourth quarter of last year, close to 25,000 people entered an Individual Voluntary Arrangement (IVA) or
bankruptcy, which represents a fall on the same period in 2006, the Insolvency Service has revealed.

However, accountancy firm Grant Thornton is convinced that the fall in insolvency rates can be partly put down to creditor behaviour and does not represent a trend that is likely to continue.

Mike Gerrard, head of personal insolvency at Grant Thornton, commented: “Take no heart from this quarter’s drop in personal insolvencies, they are merely the tip of the iceberg.

“From here on in it’s going to be a rough ride for many individuals and the numbers going insolvent will rise.”

Grant Thornton recently predicted that a third of all the personal insolvencies in 2008 will come in the first quarter as a result of excessive spending over the Christmas period.

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Industry standards have been established to reassure consumers of the conditions they can expect when considering an Individual Voluntary Arrangement, it has been announced.

The British Bankers’ Association (BBA) states that borrowers who are in need of debt help can now look forward to higher levels of transparency and improved advice.

Advertising, information and documentation standards are also set to be bolstered for the debt management industry.

Angela Knight, chief executive of the organisation, comments: “The BBA, the Insolvency Service and the participating IVA providers are united in support for this agreement, which should provide customers with the reassurances they need in order to make the right choice for their financial futures.”

She added that through the agreement, those applying for debt help through an IVA could be sure that they were receiving the most appropriate help with money.

In September, price comparison site moneysupermarket.com described that the number of people who did not fully understand the nature of IVAs as “staggering”.

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