The report, undertaken by accountancy firm KPMG, also stated that 2006 had seen the number of people becoming insolvent rise above 110,000, while consumer groups have warned that debt levels had risen to ?dangerous proportions?. Earlier, Government figures showed that the number of personal bankruptcies had declined as more and more consumers signed up for IVAs ? a scheme which allows people with high levels of debt to work out a repayment plan with their creditors.
KPMG said that a person entering into an IVA owed on average ?52,000, with IVAs proposing to repay 39% of the amount outstanding. Many of the debts are personal loans, credit card balances and other forms of ?buy now, pay later? unsecured loans. Much of the money was borrowed to meet expenditure ? including lifestyle items such as holidays and cars ? rather than to acquire assets or fund a business. The report also estimated that around 3,000 people entered into an IVA with debts in excess of ?100,000, while some as young as 21 years of age were carrying debts of more than three times their annual income. A spokesman for the report's author said: ?Too many people have debts that they have no realistic hope of repaying?.
With much of the money being owed to banks, building societies and other financial institutions, the burgeoning debt problem has seen more and more delinquent credit accounts being bought by specialist debt recovery agencies, such as those operated by the Capquest Group. In fact, the Capquest Group currently manages in excess of ?1 billion of delinquent debt.
The rise in IVAs has however, been controversial, with critics claiming they are heavily marketed by firms who stand to earn a fee once an arrangement is in place; these are often sold to debtors who would likely find themselves better off making an informal arrangement with creditors or declaring themselves bankrupt. The claim has been refuted by IVA providers, who argue that they have simply reacted to consumer needs.
The Government has stated that it has no plans to strengthen regulation surrounding IVAs, although there have been several steps taken to address concerns surrounding the scheme and to make consumers struggling to manage their debts more aware of the solutions available to them. Consumers who find themselves in financial difficulty are advised to speak to a licensed insolvency practitioner or local Citizens Advice Bureau for help and advice on how best to tackle their situation.
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Both Martin Mcallister & Johan Jeuring are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Martin Mcallister has sinced written about articles on various topics from Festival Guide, Personal Finance and Insurance. The currently manages in excess of ?1 billion of delinquent debt.. Martin Mcallister's top article generates over 49500 views. to your Favourites.
Johan Jeuring has sinced written about articles on various topics from Bad Credit Loans, Pets and Join the Army. Johan Jeuring holds a master degree in Commerce from JNU. He is working as financial consultant in Chance For Loans. To find