News

March 2007

The Office of Fair Trading has clamped down on 17 businesses promoting IVAs that it considered were potentially misleading consumers through their adverts and websites.
Of particular concern were a number of potentially misleading statements, such as;

• Falsely claiming that “up to 90 per cent of your debt may be written off” when the maximum would be in the region of 60-70%
  
• Falsely implying they can guarantee a favourable outcome by the use of such phrases as “stop all interest and charges”
  
• Failing to state that homeowners may be required to re-mortgage their properties after three years
  
• Failing to state that entering into an IVA also affects an individual’s credit rating for six years.

Lines Henry welcomes these steps. The unrealistic claims of some in the industry have long been a problem. The purpose of an IVA is for there to be a realistic and fair Proposal by a debtor to all of their unsecured creditors. It has to be fair and realistic to both debtor and creditors. IVA’s should not be looked at as a debt avoidance scheme, but rather the best offer in what are invariably difficult circumstances for all concerned.

 

January 2007

Personal debt problems have reached record levels. The number of Bankruptcies and Individual Voluntary Arrangements ( IVA’s), entered into in the fourth quarter of 2006, was 29,804. This was an 81% increase in the number of IVA’s over the same quarter the previous year. Predictions for 2007 anticipate still further increases. So what is going on?

The media have picked up on the increase in these formal insolvencies. There have been calls for more regulation, due to the unscrupulous marketing of IVAs. These calls have been led by the Banks.

Government minister Jim Fitzpatrick speaking to the Financial Times was less sympathetic to the Banks,

“If we’ve got a rise in indebtedness, if we’ve got a rise in people having difficulty servicing that debt…. then maybe the banks are lending too much money or maybe they’re not being as careful as they used to be in scrutinising the applications.”

At Just Debts we have noted a worrying trend. As licensed insolvency practitioners we are obliged to give Best Advice. If an IVA is the appropriate advice, we then have to act fairly between both the debtor and their creditors. We are aware of one major lender who are purporting to give debt advice to their customer. We query how this can be independent and any debtor should look at the impact on their other creditors. Are all of the creditors being treated alike, or is the “debt advisor” favouring the institution they work for?

For all the media hype about IVAs there are some simple facts to bear in mind:

1) The creditors all receive notice of the Proposal and get to vote on it.

2) Most of the Banks/financial institutions use firms of specialist insolvency firms to assess the Proposal and suggest modifications, if appropriate. The creditors are therefore heavily involved in the IVA process.

3)The IVA procedure is set up under statute, it forms part of Government policy. Over the last two and a half years there have been various proposals and discussion papers, put out by the Insolvency Service/DTI to canvas the views of all of the parties concerned with indebtedness, from lenders, CAB, Insolvency Regulators, the judiciary, to insolvency firms. The Banks have therefore had the opportunity to lobby the Government for change.

What we believe has happened, is that through raising the general public’s awareness of the advantages of an IVA over bankruptcy or debt management, those with debt problems have taken advantage of the procedure.

Why would you enter into an open ended debt management plan that could take 12 years or more, when for the same monthly payments an IVA is available over 5 years, with the balance being written off ?

The IVA procedure is now being used by individuals with financial problems, when previously they weren’t aware of its existence. Many of the debt management companies, that previously only offered Debt Management Plans, have now entered the IVA market. Unfortunately there are no official statistics on the number of people entering Debt Management. What appears to be happening is that a large number of individuals who previously entered into Debt Management Plans are instead putting forward IVA’s.

 

16/12/05
Latest News IVA’s up 95%. The latest DTI figures reveal that by the third quarter of 2005 there had been a 95% increase in the number of IVA’s entered into in England and Wales. The level of bankruptcies had risen by 30.9% during the same period. During the 12-month period to the end of September 2005 there were a total of 60,102 individuals who had either entered into Individual Voluntary Arrangement or bankruptcy.

 

10/10/05
IVA’s up 70%. The latest DTI figures reveal that by the second quarter of 2005 there had been a 70% increase in the number of IVA’s entered into in England and Wales. During the same period the number of bankruptcies rose by 27.5%. Between July 2004 and June 2005 the number of people in England and Wales who had entered into an IVA or become bankrupt was 54,277.

Just-Debt's own monitoring suggest that these figures are continuing to rise.