View more on these topics

IVA specialists are set to ride the debt spiral

Government figures reveal the shocking truth. Over 26,000 people became insolvent during the second quarter of 2006 – an increase of 66.3% over last year. Extrapolate these figures and insolvencies could exceed 100,000 this year and sail past 150,000 by the end of 2007.

And the trend is towards people getting into debt younger. A recent survey by NatWest shows graduates left university this year with average debts of 13,252 – 5% up on the 2005 figure. Over 60% of graduates owe more than 10,000 each.

For the young and the wider community it is too easy to blame the easy availability of credit. True, credit is easy to get but it takes two to tango. Pinch yourself when you read this – there are 64 credit card transactions every second, worth on average 60.

There must be something else going on. The economy is in good shape and interest rates are low. What must have changed is attitudes to debt and insolvency. There is a burgeoning industry in the form of individual voluntary arrangement practitioners. Part of the massive growth in insolvencies must be a result of the growth in the activities of insolvency practitioners.

Looking at the 26,021 insolvencies recorded by the Insolvency Service between April and June this year, 11,105 were IVAs. Up by 34.9% on the previous quarter and 153.2% higher than the same period in 2005.

The Enterprise Act of April 2004 relaxed the bankruptcy rules and the results are beginning to show.

Some people are so alarmed by their growth that there have been calls for the activities of IVA practitioners to be regulated. The point of this is that far too many people are opting for the IVA route, which may not be the best option. But IVA practitioners can breathe easy as calls for regulation have been rebuffed by the government.

The solution to the debt problem? There is no magic bullet but I know a good starting place. One of the big solutions is a long-term one. What’s needed is better informed and educated borrowers understanding the effect of the commitments they are taking on.

But this is long-term. We have to deal with the here and now. The level of debt continues to spiral at an alarming rate. And worryingly the fact that interest rates have risen 0.5% since August with the possibility of more to come has to be factored in. Those IVA practitioners should think about expanding their offices and staff as their will be a huge demand for their services.

Simon biddle

Recommended

Poor pay more for credit, says MP

Poor people who get access to credit pay the highest charges for it, says Treasury Select Committee chairman John McFall. The MP says early action is needed to tackle high-cost credit and illegal lending if the government is to make meaningful progress in combating financial exclusion.

FSA signs agreement with the CFTC

The Financial Services Authority has signed a Memorandum of Understanding with the United States’ Commodities and Futures Trading Commission to strengthen cooperation on the exchange of regulatory information.The MoU was signed by Reuben Jeffrey III, CFTC chairman, and Callum McCarthy, FSA Chairman, at the third IOSCO technical conference in London. McCarthy says: “This agreement builds […]

Piece together the Stonehaven options

Finally, after much speculation, the announcement came last week. Following in the footsteps of Partnership Home Loans and Retirement Plus, Stonehaven became the third provider to join equity release body Safe Home Income Plans this year.

Election will be the last word in HIPs argument

In recent years, few initiatives have polarised the financial services industry to the same degree as the government’s proposed overhaul and reform of the house purchase process.

Newsletter

News and expert analysis straight to your inbox

Sign up