Increase in number of IVAs causes concern

MONDAY, MAY 15, 2006

The number of people in the UK taking out an IVA or individual voluntary arrangement has quadrupled since 1993. The increase in popularity of the IVA is causing concern amongst charities and other bodies who offer IVA debt advice.

An individual with debt problems or facing insolvency can apply for an IVA whereby they can come to a deal with their creditors to repay a reduced monthly sum. If the majority of the creditors agree, then interest on the debts is frozen and the debtors are left debt free after the duration of the IVA, which is usually 5 years. The negotiations must be handled by a licensed insolvency practitioner, who will usually charge a fee.

The IVA is an alternative to the stigma of bankruptcy, and avoids the problem where a home or other assets can be solved to pay creditors. The concern amongst debt advisors is that an IVA may not be the best financial option for some individuals, and there are people who would be better off becoming bankrupt.

Clearly, anyone facing debt problems should seek the best professional debt advice.