Inter Financial Weblog

 

Archive for IVAs

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 »

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 »

« Older posts       Newer posts »