Just over 81,000 people started an IVA in 2021. This is the first time the number has exceeded 80,000. This is an increase of 65% in the last 5 years.
Included in this article:
- Why are more people using an IVA?
- Are IVAs being mis sold?
- Is the number of people with debt problems increasing?
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Why are more people using an IVA?
The number of people using the IVA (Individual Voluntary Arrangement) debt solution has gone up significantly in the last 5 years. In 2016 there were 49,000 people started new Arrangements. In 2021 the number reached 81,000.
There are good reasons why the IVA has become increasingly popular. In the right circumstances, it is an excellent personal debt solution.
One of it’s main advantages is that it allows debt you can’t afford to pay to be written off. You repay as much as you can over 5-6 years. After that, the Arrangement is completed and any remaining debt no longer has to be paid.
Because the agreement has a fixed end date, you know when you will be debt free. This give significant benefits over a debt management plan (DMP). In a DMP, you are required to continue to make the agreed monthly payments until your debt is paid in full. Depending on your circumstances, this could take far longer than 5-6 years.
Another significant advantage of an IVA is your property is protected. You do not risk having to sell your home.
Are IVAs being mis sold?
Despite the clear benefits of IVAs, they are not the best option for everyone. Over the past few years, there has been a growing concern that people have been talked into using the plans when it is not in their best interest.
So called debt packagers have been paid large commissions by IVA companies for recommending the solution.
The FCA (Financial Conduct Authority) has become aware of this and is concerned about poor advice and mis selling. It has said it believes that the significant rise in the use of IVAs is a direct result of this practise. It is hoping to clamp down by banning lead generating companies from being paid commissions by IVA firms. The change is due to be introduced in April 2022.
IVA Information is not a lead generator. We have over 20 years of experience in advising people about which debt solution is right for them. If you are thinking about starting an IVA, give us a call (0800 011 4712) or complete the form below for free, confidential advice.
Is the number of people with debt problems increasing?
At the onset of the corona virus pandemic in 2020, there was concern that the number of people struggling with debt would increase. That does not seem to have played out.
Between 2020 and 2021, the number of new IVAs only increased by around 3.5%. This indicates that there has not been a mass increase in debt problems. It seems as through the money the government has spent supporting the economy has had the desired affect.
The story in 2022 may however prove to be different. Inflation is increasing. As a result, most families are expecting dramatic increases in the cost of household energy, transportation and food bills.
The question is whether incomes will rise to match. If not, it seems reasonable to suggest that as a result, we will start to see higher numbers of people in financial difficulty. That in turn may lead to higher volumes of IVAs.
Are you thinking about starting an IVA to deal with your debts? Give us a call (0800 011 4712) or complete the form below and we’ll get back to you.