Fifth Of Bankrupts Are Under 30 Years Old

March 27th, 2008 IVA Information Administrator

One in five bankrupts is now under the age of 30 as student debt and the consumer spending splurge starts to bite. The proportion of bankruptcies among the 18 to 29-age group has jumped from 7.9% in 2001 to 18.7% last year. The average age of a bankrupt has fallen from 43 to 41 in the last four years but female bankrupts tend to be younger than male bankrupts.

The figures, from the Insolvency Service, highlights a worrying trend for a Government that is trying to encourage pension saving amongst the young. The UK's consumer debt mountain, which includes mortgages, currently stands at £1.2 trillion and shows no signs of shrinking.

It also echoes today's call from the Financial Services Authority that young people need better finance education while at school. The City watchdog said a generation are growing up with no savings, no pension and huge debts.

Philip Long, head of corporate recovery at accountancy firm PKF, described the figures as worrying. He said: 'It's easy for young consumers to get credit. As soon as they finish college they are offered consolidation loans for their student debts and it's too easy to make the situation worse.' He predicts the average age of a bankrupt will continue to fall when student fees are raised later this year. Debt to the Student Loans Company is currently outside of bankrupt laws, but by consolidating it to a normal bank loan, the individual can claim for bankruptcy.

Long added that banks are failing to do properly assess a borrower's ability to repay. He said: 'We had a bar maid come to us who earned £1,000 a month gross, living in London. She had £30,000 worth of store card debt.'

Insolvency Service director of policy Mike Norris said: 'The research gives us some interesting information about the characteristics of bankrupts over the period. 'While the profile might be changing in some respects, men in their 30's and 40's continue to account for the largest number of bankruptcies and average scheduled debts continue to fall between £45,000 and £50,000.'

Nearly two-thirds of individual bankrupts in 2005 were men, according to figures from the Insolvency Service, with the average bankrupt owing £46,000.

However, the proportion of women filing for bankruptcy is rising, up by seven percentage points to 39% last year. The national statistics were mirrored by regional figures, with men more likely to be bankrupts than women in all seven regions featured. It added that all regions had seen an increase in the number of young people becoming insolvent, with the Midlands and the South West seeing the biggest jump.

Posted in IVA News | No Comments »

IVA Companies Cashing In On Rising Debts

March 27th, 2008 IVA Information Administrator

Shares in Individual Voluntary Arrangement (IVA) providers had a strong week after a pair of positive trading updates. Debtmatters said results for the year just ended will be ahead of forecasts. And Debt Free Direct said volumes in March were 155 per cent up on March 2005.

Investors Chronicle April 13th, 2006

Posted in IVA News | No Comments »

Debt Free Direct keeps March IVA market share at under 20 pct

March 27th, 2008 IVA Information Administrator

Debt Free Direct Group PLC said it maintained its market share of Individual Voluntary Agreements (IVAs), a simplified form of personal bankruptcy, at just under 20 pct in March 2006.

The wider market continuing its strong growth in the month with volumes up 29 pct on the previous month and 155 pct on March 2005, Debt Free Direct said.

Debt Free Direct said volumes are continuing to grow rapidly and work in progress is at record levels. The AIM-listed company said it is taking on new leasehold premises that will more than double its capacity to process IVAs. These new facilities will become fully operational in October 2006.

The company added that it has brought on stream facilities in Northern Ireland capable of completing 150 IVAs per month with immediate effect. This capacity is expected to double over the next 12 months.

Posted in IVA News | No Comments »

In an IVA, Will My Debt be Frozen and Total Debt Reduced?

March 27th, 2008 IVA Information Administrator

Yes. The IVA is an effective tool that can be used to deal with multiple debt problems without the need to petition for your own bankruptcy.

As part of the Myvesta IVA process your creditors will be professionally dealt with and the IVA proposal will typically involve a large portion of your debts being forgiven (written off) by your creditors. During the IVA period all interest and charges are completely frozen and your creditors are not allowed to make contact with you.

Posted in IVA News | No Comments »

Large Insolvency Practitioners Misselling IVAs To Benefit Claimants

March 27th, 2008 IVA Information Administrator

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.

Posted in IVA News | No Comments »

An IVA is a Legitimate Alternative to Bankruptcy

March 27th, 2008 IVA Information Administrator

Aside from the social stigma, if you are declared bankrupt uk”>bankrupt you:

-Lose your business and professional status
-You are not allowed to hold public office
-You will not be able to get credit over £500 without disclosing that you have been made bankrupt
-Face a number of restrictions with regards to running a business
-Your employment prospects will be prejudiced

However, according to Clear Start, the UK Consumer Debt Service, there is hope in the form of an IVA. IVAs were introduced by the government as a legitimate alternative to bankruptcy.

With an IVA , debtors make monthly payments based on what they can actually afford over a five year period. It is not uncommon for a debtor to pay as little as £200 a month into an IVA. After five years, the debt is deemed to have been cleared. This happens even if the creditors end up getting less than 20% of their debts repaid.

Furthermore, IVAs do not have any of the stigmas, restrictions or disqualifications associated with bankruptcy.

As a result, IVAs offer an affordable and legitimate alternative to bankruptcy and enable debtors to make a fresh start.

Posted in IVA News | No Comments »

Consumer Comfortable With Debt

March 27th, 2008 IVA Information Administrator

The inaugural CreditExpert/ Ipsos MORI research polled c2,000 people across Britain and will track consumers' current credit confidence and future expectations on a quarterly basis, establishing Britain's first ever consumer credit confidence index.

For the forthcoming six months, consumer confidence is high, with a third (32%) of borrowers expecting to decrease their current level of debt. Only 11% expect an increase. Of the 13% who are uncomfortable with their level of debt, 51% expect this to decrease in the next six months. Meanwhile, 70% of financially-confident British borrowers, whose debts have decreased in the past six months, expect to reduce their debt even further in the coming months.

London's high house prices, which are on average 50% higher than the UK average, combined with the higher cost of living in the capital, appear to be having a significant impact on credit confidence. The net confidence of Londoners about meeting their monthly household bills and repayments on time is rated as just 47% in contrast to all other regions, where confidence rates range from 74% in the East Midlands to 91% in the South West.

This reported comfort with current borrowing levels is based on low levels of knowledge for some, with 21% of people admitting they have no idea whether they have a good or bad credit score. Although Britons have an average of five credit agreements each, only 5% say they have requested to see their credit report. Credit report information includes peoples recent credit history and strongly influences credit scores and lending decisions.

Posted in IVA News | No Comments »

Insolvency Practitioners and Lenders Act to Stem Flow of Paper Work Caused by Massive Upsurge in IVA

March 27th, 2008 IVA Information Administrator

At the forum over 125 delegates from the finance industry and Insolvency Practitioner firms were asked to list their top three issues relating to the production and processing of IVAs. Creditors listed the volume of correspondence, the desire for a standard format for proposals and confirmation that an IVA is the most appropriate route for a debtor in financial difficulties as their top three concerns.

Steve Treharne, Head of Personal Insolvency at KPMG said: “As the number of IVA proposals continues to rise dramatically, a huge volume of paper work is produced. This causes major problems for creditors in the processing of IVAs. The same proposal quite often can be sent out as many as 6 times to creditors who may have customers with multiple accounts and the Insolvency Practitioner firms have to pay for the paper, post and packaging, increasing unnecessary costs. Such duplication seems wholly unnecessary and ways to streamline the process need to be found. However this relies on the understanding from both the lenders and Insolvency Practitioners on how this process can be best managed.”

The Insolvency Practitioners who attended the forum expressed concern at the number of modifications proposed by creditors or their representatives to the debtor’s original offer, especially as some of the modifications appeared to contradict those proposed by other creditors. In addition, uncertainty regarding the way in which the debtor’s interest in his property should be addressed and the lack of votes received in time for the creditors’ meeting made up their top three concerns regarding the production and processing of IVAs.

Treharne said: “Feedback following the forum has been extremely positive from all parties concerned. We have noticed already that both creditors and Insolvency Practitioners have a better understanding of the issues and action points are being implemented. A 2nd forum is scheduled for later this year to ensure that this momentum continues.”

A working party including representatives from creditor organisations and Insolvency Practitioner firms who specialise in producing IVAs has been tasked with taking forward the action points identified.

Treharne also welcomed the publication of the Government’s response to the consultation paper “Improving Individual Voluntary Arrangements.” Treharne said “It is good to see that the idea of a Simple Individual Voluntary Arrangement has been broadly accepted by the Industry. This revised procedure will help to cut out much of the bureaucracy that bedevils the current process and will make the IVA more accessible to those struggling with debt. It is good news for the creditors too as the suggested reduction in paperwork will streamline the process and take out many of the frustrations that the present over bureaucratic system causes.”

Posted in IVA News | No Comments »

IVAs Heating Up

March 27th, 2008 IVA Information Administrator

But the soaring number of people taking out IVAs — the market more than doubled to 20,293 over the past two years — has resulted in debt management firms increasingly offering IVA services to wealthier borrowers, who usually have debts of about £60,000.

Bains & Ernst and Gregory Pennington, the two leading debt management companies, have both set up specialist IVA arms. Bains & Ernst set up Blair Endersby in late 2004 and Gregory Pennington set up Freeman Jones in January 2003.

A spokesman for Gregory Pennington admitted to Times Money that the company is a big player in this market Call centre staff at Bains & Ernst and Gregory Pennington decide whether a debtor should be referred for an IVA — the debt management firm receives a fee for every IVA that is arranged.

Gregory Pennington says that a conversation, which lasts between one and two hours, takes place between the customer and a debt adviser, during which a variety of options will be discussed including a remortgage, a debt management plan, bankruptcy or an IVA.

Gregory Pennington says that the number of IVAs it promoted rose by a fifth last year, with 102 debtors entering into schemes in December 2004. The company says that the increase is a result of rising levels of overindebtedness and a growing awareness of IVAs as a solution.

But Gill Hankey, a director at the Bankruptcy Advisory Service, is critical of the process by which debt management companies steer debtors into IVAs, which she describes as an “IVA factory” approach.

She questions whether it is appropriate for call centre staff to give advice about IVAs to people who may not even know what an IVA is before they make the call. Mrs Hankey says: “Debtors are being dealt with by call centre staff who do not have the expertise or experience to advise them properly whether an IVA is the right option. The insolvency practitioner (to which the IVA is referred) is effectively rubber-stamping the IVA proposal made by a person in a call centre.”

Gregory Pennington says that clients are not misadvised and it points out that the rate of IVAs that fail is currently in “single figures”. Bains & Ernst refused to comment.

The Office of Fair Trading (OFT) laid down guidelines of best practice for the debt management industry in 2001.

The guidelines are designed to ensure transparency in the promotion and advertising of debt management plans, which are often taken out by lower-income groups.

However, Ms Hankey says that she increasingly encounters cases of middle-class debtors who have been wrongly advised to enter into an IVA by debt management firms.

Even well-educated people can take the wrong advice when under the intense strain that overindebtedness brings, she says. If you do take out an IVA when it is not the right debt solution for you, the consequences can be severe.

David Mond, chief executive of ClearDebt, a specialist IVA company, says: “Most IVAs have a ‘windfall clause’, which allows banks and credit card companies to claw back any unexpected large sums a debtor receives, up to the full value of the debt owed.

“In one case we recently encountered, a woman would have lost the home that she was about to inherit from her terminally ill parents if she had undertaken an IVA.”

Nick Pearson, national debt co-ordinator of AdviceUK, says that debt management companies are attracted to the high fees that can be generated by offering IVAs.

“Either we start offering IVAs or we will see more cases of vulnerable consumers falling into the hands of companies that are motivated by profit,” he says.

IVAs versus bankruptcy

Posted in IVA News | No Comments »

Lies, Damned Lies And Statistics!

March 27th, 2008 IVA Information Administrator

I've often wondered about all those opinion polls that seem to reveal things like eight out of ten owners say their cat prefers Whiskas, how the Labour and Tory parties are currently running neck and neck in popularity terms and how women are better drivers than men.

As Mark Twain once pointed out: " There are three kinds of lies: lies, damned lies and statistics" so I have a tendency to take these surveys with a large pinch of salt.

Besides, there's also the line from the American comedian, George Carlin, which goes something like: "Think about how stupid the average person is and realise half of them are dumber than that".

Nevertheless, I was quite fascinated when I read a compilation of all the latest debt statistics put together by the money education charity, Credit Action. Public ignorance about personal finance matters makes me think that George Carlin's quote may be more accurate than Mark Twain's.

Take the following as examples:

A Mori poll recently revealed that nearly four out of five people do not know that APR refers to the interest and other costs of borrowing.

According to the British Bankers' Association the proportion of credit card balances bearing interest was 75% in February 2006. The average interest rate on credit card lending is currently 15.7%.

In 2005 the average unsecured problem debt of a client starting a debt management plan with Consumer Credit Counselling Service (CCCS) increased by 10.5% to £29,400.

So, are these lies, damned lies and statistics or are people really that dumb? Three quarters of all credit cards are attracting average interest charges of nearly 16% because their owners have never heard of 0% credit card deals? And it's because they don't know what APR means? And people with serious debts have genuinely managed to spend nearly £30,000 before they realise they've got a problem?

I suspect much of these problems can be attributed to apathy and greed. These people know they could manage their money better, they just want too much stuff and can't be bothered to save up for it. And that is backed up by PricewaterhouseCoopers insolvency experts who looked at 80% of the Individual Voluntary Arrangement applications made in July 2005. Three quarters of the debtors put down "living beyond their means" as the main reason for being in trouble. Only 20% said they had lost their jobs or had suffered a breakdown in their marriages — two of the events traditionally thought most likely to trigger personal insolvency.

Mind you, there is the question of how culpable lenders are. According to a survey by uSwitch, most credit card holders were issued cards without the lender carrying out any checks to verify that they could afford to repay the debt.

It seems that 88% of people who successfully applied for a credit card during the last year were not asked for proof of their annual income beyond the figures stated on the application, and 95% were not asked to show evidence of their outgoings in order to provide a true picture of affordability. To my mind that makes the lenders even dumber than their customers!

Motley Fool
Read more at: IVA UK site.”>http://iva-uk.blogspot.com/2006/04/lies-damned-lies-and-statistics.html.

Posted in IVA News | No Comments »