IVA Statistics Misleading, Claim Insolvency Practioners
In the wake of the official Insolvency Service statistics for the first quarter of 2008, Insolvency Practitioners have complained that they are not nearly comprehensive enough and so misrepresent the true state of personal debt in this country. Melanie Giles, IP and IVA.co.uk forum expert, has commented that: “Given that the Insolvency Service statistics only focus on formal appointments, i.e. bankruptcies and IVAs, the ongoing trend of consumer indebtedness is not being appropriately represented – the number of people entering into debt management programmes is actually growing at a faster rate.”
This has long been a problem in the personal debt and insolvency industry. Certain sectors are subject to strict scrutiny and are tightly legally controlled, while others inhabit a legal grey area and are more difficult to control and regulate. The IVA industry has numerous laws that are applied to it, and it is very closely monitored. An IVA is a legal contract between and debtor and his or her creditors which must be respected and followed closely.
Debt Management Plans and other informal debt solutions are not so well monitored or legally binding. Statistics are not published about who is on them, how much they owe, what their rate of success is, and so on and so forth. This does not mean that Debt Management Plans are necessarily problematic, it just means that they are harder to monitor and, potentially, easier to offer poor service on without getting caught out.
The downturn in IVAs is suspected to have driven many debtors into Debt Management Plans. Given that there is no write off of debt, many of these plans can potentially last ten years or longer. It is highly unlikely that a debtor will be able to maintain payments for this length of time or resist the temptation of taking out further credit, and this is likely to eventually lead to bankruptcy. If debtors continue to turn to unregulated Debt Management Plans, we won’t have a full idea of the personal debt crisis in the UK until it is too late.
