Introduction

The social policy team at The UK Insolvency Helpline is becoming increasingly concerned that individual voluntary arrangements (IVAs), the popular alternative to bankruptcy, are in some cases being mis-sold by the multitude of 'IVA factories' which have sprung up over the past few years.

Our own specialist IVA advice unit receives over 100 calls a day from people being poorly advised by many profit-making advertising debt firms and persuaded that an IVA is right for them in circumstances where it clearly is not suitable.

Why use an IVA?

An IVA allows a debtor to reach an agreement with his or her creditors to wipe off some of the money owed in exchange for reduced monthly payments. The IVA company then formulates the repayment plan, typically lasting five years, with the creditors.

Our  IVA unit state that IVA applications have doubled in each of the past two years and is predicted to reach it highest in 2007. They are popular because they avoid the stigma of bankruptcy and allow debtors to retain assets, including their homes.

Please  note that  IVAs are not suitable for everyone and come at a price with most firms charging huge upfront fees of up to £1,500 before work is commenced. These fee charging rogue companies are misleading their clients who can get a better service for no cost upfront.

There are set criteria which someone has to meet before they are put on an IVA. One of these is that they have to have a surplus income of £200 a month at least. You must also have at least 3 separate creditors.

Example of bad IVA advice

One horrific example of bad IVA advice is a nurse based in Cardiff who contacted a debt company after seeing a flashy TV advert and was advised to apply for an IVA. She then contacted The UK Insolvency Helpline because she was concerned that her monthly repayments were unaffordable - they had been assessed on income that included her son's disability allowance.

The UK Insolvency Helpline’s own IVA advice team offers comprehensive advice on the topic of IVAs so that people are aware of the fees involved. In reality fees should be included in the monthly repayments of an IV, not charged upfront.

The UK Insolvency Helpline are in constant touch with the authorities providing dossiers of complaints about the profit making debt advice industry breaching advertising rules by making exaggerated claims about their ability to write-off debts to banks and other lenders.

Like many consumer groups and banks the UK Insolvency Helpline is concerned that people may be being encouraged by unscrupulous IVA companies to commit to IVAs, even where this may not be the right course of action. These companies aren't always properly informing their customers about the fees they charge for arranging an IVA, or about the adverse effects of IVAs on credit ratings.

The IVA advice unit is concerned about the quality of advice given by IVA advisers to consumers. Firm action must be taken against any IVA company found to be issuing false or misleading advice.

People with debts are morally obliged to repay them. How much they repay depends on their circumstances. We conduct a thorough review of their income and outgoings before contacting creditors. It is not right to help people avoid their legal liabilities.

The IVA advice unit is hearing from customers who are being told an IVA won't appear on their credit rating when the reality is that it will. Some companies are giving the impression that this solution has a much smaller impact than it does.While all IVAs must be sold by a registered insolvency practitioner, there is no regulation of the companies employing the practitioners or of the front-line staff. The IVA advice unit  want the government to step in. 'One third of IVAs fail in the first two to three years. If there is mis-selling, more will fail.

The IVA advice unit is urging people to weigh up all the options before signing up to any type of arrangement. 'If you have a debt problem, an IVA could be the best option because it could stop you having to lose your home, for example. It could be an absolutely dreadful option. Our IVA team can help to negotiate the minefield of options.

Individual Voluntary Arrangement applications up 118% in 2006

The number of people applying for an Individual Voluntary Arrangement (IVA) grew at a rate of 118% in 2006. The estimated number of insolvencies for 2007 has risen to 150,000 and for the first time ever, it’s been predicted that more of these will be serviced by IVAs than Bankruptcies.

But is an IVA really a more effective tool for servicing insurmountable amounts of debt than bankruptcy? Obvious advantages are that in most cases, people who apply for an IVA manage to maintain ownership of their properties and also avoid the public humiliation of a bankruptcy.

In reality, you have to determine whether you can even afford to meet the terms of an Individual Voluntary Arrangement i.e. the monthly repayments before you can make the decision to file for the procedure. In some cases, a personal bankruptcy can be the only way out for people with tremendous debt and no possible way of paying even a small amount back to the creditors.

back to top

IVA Menu

• IVA (Individual Voluntary Arrangement) Overview
• Starting an IVA
• The IVA process
• IVA Monthly Payment
• IVA Pros and Cons
• IVA FAQs - Frequently Asked Questions
• Starting an IVA
• The IVA procedure
• What is an IVA?
• IVA Enquiry Form
• How to start an IVA
• Who can an IVA help?
• IVA's - Facts & how they work
• Benefits and Advantages of an IVA
• Who can an IVA help?
• IVA - Help and information
• How an IVA works
• IVA - Estimated timescale
• The IVA approval process
• The IVA criteria
• Bankruptcy or IVA
• IVA - What are the costs involved?
• IVA - The documentation required
• IVA - Download forms
• Sample IVA proposals for PAYE worker
• IVA - Guide to creditors Fees
• IVA - Standard Terms & Conditions
• Individual Insolvency Register
• IVA
• IVA lifestyle
• Debt free after an IVA
• Is my home protected in an IVA?
• Chances of IVA rejection
• Keeping my car
• Credit rating after an IVA
• Credit report and the IVA
• Professional accreditation in an IVA
• IVA conclusion
• IVAs and meetings
• Change in circumstances whilst in an IVA
• IVA benefits for creditors
• Failed IVA payments
• IVA Case Studies
• Benefits of an IVA
• Implications of an IVA
• After an IVA - the end of an IVA
• IVA Help
• Best Debt Solution
• Proposed changes to individual voluntary arrangements (IVAs)
• What happens after an IVA fails?
• IVA Guide Centre