Figures released at the start of this month show that the number of people taking out Individual Voluntary Arrangements has gone up 10% since the second quarter of the year, and figures now stand at their highest levels since 2010. These figures are also the second highest in the last 10 years and are part of over 26,000 people in England and Wales being made insolvent in the third quarter of this year.
What is an IVA?
An IVA is a way of coming to an agreement with your creditors about how you will pay your debts to them. Because this agreement is bound by law, your creditors must act in a certain way towards you, and this includes no longer harassing you for payments or even adding additional interest on your debts. Usually an IVA agreement means that you will pay the same monthly amount over a five-year period, with any unpaid balance written off at the end of this time. IVAs are often seen as an alternative to bankruptcy, and indeed, if you have an IVA in place it can be used to stop a bankruptcy proceedings being made against you.
Cost of living
It is believed the main reason behind the rising number of IVAs is the increasing cost of living. Not only are more people taking out various forms of loans to try to pay for the things they need, but because every day expenses and bills are also increasing, this then makes it even more difficult to pay back these debts. Of course, there are other reasons for people getting into debt and considering an IVA as a potential solution such as one-off expenses which they were unable to pay back and redundancy. Frivolous of credit cards, overdrafts and store cards etc can also put a person in a very difficult position.
Of the 26,030 people made insolvent in the third quarter of 2013, just over half of these – 13,394 – took out Individual Voluntary Arrangements. This is a 10% leap on the second quarter of 2013 and the highest quarterly figure since the second quarter of 2010. An IVA must be put in place by a licensed Insolvency Practitioner and registered with the Insolvency Service.
Apart from the rising cost of living, one of the other explanations for the increasing number of IVAs is that many people cannot afford the fees associated with bankruptcy, which are around £700. Some other people may have too much debt or too many assets to qualify for a Debt Relief Order. In these cases, applying for an IVA is an obvious next step.
Are you interested in an IVA?
If you are currently struggling with personal debt and would like to know more about IVAs or any other potential solution to your problems, contact Dissolve Debt today. We have professional personal debt advisers ready to help you manage your debts; call us on our freephone number or send us a message through our website to learn more.