Are IVAs easier to obtain ?
Banks and other lenders seem to be relaxing their payment thresholds for individual voluntary arrangements (IVAs) and are approving lower-repayment applications for the first time
Previously, only debtors able to commit to monthly payments of at least £200, paid over five years, were accepted, which is beyond the means of many people. In the past few months, though, creditors have agreed to hundreds of more flexible IVAs with monthly payments of under £200.
The main IVA selling point, as an alternative to bankruptcy, is that debtors are able to reduce their debts to a single monthly payment and have a legally binding agreement to become debt-free upon completion of the arrangement. From the creditors’ point of view they can claw back a proportion of what they are owed in a relatively short amount of time, and IVAs offer better returns for lenders than bankruptcies.
While lower monthly payments may be welcome to some debtors who would have been unable to meet a £200 payment, undertaking an IVA is an extremely serious step and needs to be thought through
An IVA involves setting up a payment plan between the debtor and creditors. It must be arranged by a licensed insolvency practitioner who prepares a financial report for court proceedings. Provided 75 per cent of the value of the debt held by creditors who vote on the day  accept the proposal, the IVA is legally binding, interest is frozen on the debts and as long as all the terms of the arrangement are met, the payments will be considered a full settlement of debts. But there are costs. First, there is a fee, typically around £1,500, paid to the insolvency practitioner for setting up the IVA, this will be taken out of the monthly payments made. Afterwards, commissions are taken out of the monthly payments as ongoing supervisory fees, which significantly reduce the amount being put towards the debt. The monthly payments may change, which could spell trouble if a change in circumstance rendered payments beyond reach, and, during an IVA, the debtor is unable to take out credit cards or loans.
IVA providers used to have a tainted reputation for aggressive marketing to people for whom it is not appropriate. The Consumer Credit Counselling Service (CCCS), recommends IVAs in a mere 2 or 3 per cent of cases. Despite this, in the first three months of 2009 the number of IVAs hit the 10,713 mark, an increase of 11.8 per cent on the same quarter of 2008, according to statistics from The Insolvency Services
Andy Davie