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Archive for Insolvency

Individual Voluntary Agreements

Monday, March 17th, 2008

If you find you are having difficulty in repaying your debt one option that is always open to you is to seek an individual voluntary agreement (IVA) from a specialist lender.

Under the terms of an IVA, if you own greater than £15,000 you can try and reach an agreement with your lender in which you only pay back a percentage of the loan or all of it, but the interest charges are frozen.

In the first 3 months of 2007, 11,300 Britons entered into such agreements with their lenders. That is a 50% rise one the same period in 2006 and goes to show how difficult many households are now finding it to deal with debts held in personal loans and credit cards.

However the problem is that now many lenders are taking an increasingly tough line on accepting IVAs. It used to be the case that many lenders would accept repayment on 25% of the loan or debt, however now that figure has gone up drastically and it is becoming increasingly difficult for many borrowers with severe debt problems to even repay their IVAs.

For example HSBC will now only accept an IVA if the borrower agrees to pay back a minimum of 40% of the loan while the student loan company will not allow their debt to be subject to any form of IVA or bankruptcy.

Northern Rock should use its own example when considering individuals in debt crisis. The crisis-hit bank rejects IVAs as standard practice. This is now becoming common practice from many lenders.

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

The challenge of repaying your debt

Monday, March 17th, 2008

Imagine you are in the situation where you actually want to pay off all of your debt but your lender will not allow you to.  This is a common situation faced by thousands of borrowers across the UK each month.

The problem arises from the fact that in order for many of these borrowers to be able to repay their existing debt they need their lender to freeze the debt they currently have, in effect stop charging interest on their credit card or loan. This will than give the borrower a much higher possibility of repaying the loan instead of going into bankruptcy. If a borrower was to be declared bankrupt, then the bank certainly wouldn’t get all its money back.

In order to freeze debt the borrower must enter into an agreement with the bank. However many lenders do not like to do this as they view these agreements as losing them money – the interest that they make their profit on.

Many borrowers cannot afford to repay any more than the minimum repayments on their credit card each month. This means the possibility of actually clearing their debt is almost impossible, as interest repayments become a larger and larger part of the debt (monthly credit card interest often matches the minimum repayable, so the debt doesn’t diminish).

Applying for an individual voluntary arrangement (IVA) is one way of solving your debt problems. Under these agreements, those owing over £15,000 agree to repay a percentage of all of the money owed typically over a period of five years.

The trick is in negotiating with lenders to freeze interest repayments. This in effect prevents the debt from growing any further. However many lenders refuse to enter into these agreements.

Posted in Bad Credit, Banking, Bankruptcy, Borrowing, Consumer Credit, Consumer debt, Credit Card, Debt management, Financial products, Insolvency, Missed payments, Personal debt, Personal loans, UK Finance | No Comments »

Failing Pension Funds

Thursday, August 2nd, 2007

A large portion of the people who took part in a recent poll claimed that they could not live on the state pension, and yet they have never saved for their pension.  This is leaving many people in dire straights when they retire at 60, and is prompting the government to move the retirement age to 65, and even a possible 70 years old if things do not improve.

The move is to reduce the number of older people who are living dangerously below the poverty line.  Today’s 65+ age group are still making mortgage payments. This is something that was not seen a couple decades ago when pension levels were established.

The government wants to protect these people, but at the same time, they are not willing to accept responsibility for paying their mortgages.  Reports from charities like Citizens Advice claim that many people are left with less than 50 pounds a week to live on after they pay their mortgages and utilities.

The problem is likely to increase as the banks extend the age limit for lending.  They are already lending mortgages to people who will need to live to be 120 years old if they expect to repay the loan.  As people age, and their medical demands increase, they will not be able to repay their mortgages or the personal loans secured against their home. This will leave many struggling, or heading to bankruptcy court.

As insolvency levels increase, and the bank of England is preparing to increase the interest rate two more times this year, many pensioners are forced to leave their homes, defaulting on their mortgages, and depend on the charity of their children.

Posted in Bad Credit, Bankruptcy, Borrowing, Consumer Credit, Consumer debt, Debt management, Financial news, Financial products, Homeowners, House repossession, Housing news, Insolvency, Missed payments, mortgages, Personal debt, Personal loans, Property, UK Finance | 1 Comment »

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