The Insolvency Practices Council said that welfare claimants in heavy debt and with no hope of keeping up repayments would be better off filing for bankruptcy, but this would mean smaller fees for insolvency practitioners.
Now the IPC wants to crack down on the misselling of individual voluntary arrangements and to make sure that there is an obligation for practitioners always to offer 'best advice'.
Under an IVA, creditors agree a schedule for repayment of a percentage of the money owed.
But while a practitioner recommending bankruptcy could be paid little more than a 'call-out fee' of perhaps £100, arranging an IVA can cost up to £4,000, and the practitioner can earn the same again by supervising it.
In its annual report, the IPC noted: 'Cases have been drawn to our attention this year in which IVAs have been recommended to debtors whose only available source of finance was unemployment or disability benefits and who, in our view, could not reasonably have been expected to meet the payments required.'
In the third quarter of last year, there were 12,043 bankruptcies and 5,519 IVAs in England and Wales.
Tags: advertising, insolvency, ipc, iva, misselling
