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Archive for Insolvency

Record number of insolvencies for 2008

Tuesday, July 15th, 2008

The high levels of debt that Britons have built up over the past few years are finally coming back to haunt many households. The impact of the credit crunch is starting to take its toll on borrowers according to experts and it is expected that things are going to get much worse as the year progresses.

The accountancy firm KPMG has said that it is predicting that over 130,000 people are going to be declared bankrupt or enter into individual voluntary arrangements with their lenders. This will be up from the 109,615 who did the same last year.

When people enter into individual voluntary arrangements (IVA) they are allowed to restructure debts such as personal loans, credit cards and hire purchase so that their debts can become more manageable. Monthly repayments are made for a fixed period of time with the remainder of the debt being written off at the end of the period.

It is estimated that as many as 2,500 people have debt in excess of £100,000. In 2007 the average amount owed by individuals entering into IVAs was £50,300.

KPMG found that the average repayment for a loan on an IVA was 38% of debt. The average debtor repaid £19,000 of their debt and as a result £1.3bn had to be written off by creditors.

The high average level of debt indicates just how bad lending has been in the past few years. Most debtors owe so much that they have no realistic way of actually repaying their debt.

Posted in Bad Credit, Bankruptcy, Borrowing, Consumer Credit, Consumer debt, Credit Card, Debt Consolidation, Debt management, Financial news, Homeowner Loans, Insolvency, IVAs, Missed payments, Personal debt, Personal loans, Secured loans, UK Finance, Unsecured loans | No Comments »

Rogue debt advisors misleading customers

Wednesday, June 4th, 2008

It has been revealed that a rogue debt advisor company, unregulated by any watchdog, has begun to mail out leaflets to people in financial difficulty advising them to default on their loans. The company then offers to step in and help them to become bankrupt.

The company which is called the IVA Council (IVAC) is claiming that thousands of people in debt are each year being poorly advised on how to clear their debt. The IVAC also claims that thousand of indebted customers are being herded into formal debt agreements called Individual Voluntary Agreements (IVA) by creditors.

The company argues that these people should not end up living in poverty desperately trying to clear their debts but instead opt for bankruptcy. The debts could be on mortgages, personal loans, credit cards or utility bills, but the advice is the same each time: default.

The IVAC has mailed thousands of customers of debt advice services across the whole banking sector. The IVAC managed to get these details by buying them off the government-backed agency the Insolvency Service. This has prompted calls for the database to be made less readily available to the public.

Some recipients of these letters from the IVAC have complained that some sensitive information is clearly available in the display in the letter envelope.

IVAC has also set up a website that appears to be an almost exact copy of the Insolvency Service’s website. The company is also allegedly using an old logo of the Department of Trade and Industry (DTI) despite the fact that the DTI changed its name to the Department for Business Enterprise and Regulatory Reform last year.

The truth is that no one can escape their responsibilities and IVAs and bankruptcy are very serious measures that impact upon future credit for many years.  They rarely mean that debts can be avoided. Instead the debtor is expected to repay loans and bills at an agreed rate, whilst living on the very same reduced income that this rogue company claims to help avoid.

Posted in Bad Credit, Bankruptcy, Borrowing, Consumer Credit, Consumer debt, Credit Card, Debt management, Financial news, Financial products, Homeowner Loans, Insolvency, IVAs, Missed payments, Personal debt, Personal loans, Secured loans, UK Finance, Unsecured loans | No Comments »

Fall in number of insolvencies and repossession

Friday, April 11th, 2008

Despite a large number of warnings that repossessions and insolvencies were on the rise as a result of higher interest rates and the fallout from the credit crunch, recently published figures actually show that the exact opposite has happened.

The figures which were released by the Insolvency Service show that 26,072 people were declared insolvent in the three months after the credit crunch hit. This is a fall of 3% on the number of insolvencies in the previous quarter and a fall of 5% of the same period the previous year.

While the number of bankruptcies had increased by 2.2% on 2006 to a total of 15,833, the number of individual voluntary arrangements (IVAs) was actually down by 14.3% to 10,239. The large drop in IVAs, which allow borrowers to write off some of their debt in return for creating a payment schedule with creditors, could be explained by the fact that most lenders dislike the schemes since they are then forced to write off bad debts. With banks needing to claw back as much money as they can, they are refusing to allow personal loan and credit card customers to ‘go bad’.

While it is not clear which lenders were behind the majority of rejections for IVAs it is believed that Northern Rock is on of the main contributors rejecting all applications for IVAs. This is unsurprising, given its recent history.

HSBC has also changed its policy to IVAs. In the past, repayments for IVAs came in somewhere around 25p for every £1 owed to the lender. HSBC has now upped its threshold to 40p for every £1 borrowed.

As a result of these changes borrowers are now more likely to enter into debt management plans with their creditors.

Posted in Bad Credit, Bankruptcy, Borrowing, Consumer Credit, Consumer debt, Credit Card, Debt management, Financial news, House repossession, Housing news, Insolvency, Missed payments, mortgages, Personal debt, Property, Secured loans, UK Finance, Unsecured loans | No Comments »

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