Thursday 4th of February 2010
Individual voluntary arrangements (IVA) could increase in the UK after it has been reported that Britons had a combined £1,459 billion of outstanding debt in November.
A study by the National Audit Office (NAO) has found that personal borrowing was equivalent to 160 per cent of household pre-tax annual income.
With such a large proportion of income going on debt, households could find they are left with little cash to meet other financial commitments.
An IVA may answer such a situation by freezing the interest rates on unsecured debt. By preventing interest repayments from soaring, an IVA could make meeting debt a more manageable task for people.
"Many people are able to manage their debt, but for some the problems may seem insurmountable," Amyas Morse, head of the NAO, said.
If debt appears to be uncontrollable then some households may think that going bankrupt is the only option.
However, because an IVA can service debts from a number of lenders which are more than £15,000, this type of repayment plan could be an ideal alternative for those who want to avoid the negative consequences of bankruptcy, such as potentially losing a home.
By Ashley Littley
- House price rise 'may not indicate recovery'
- Equity release 'needs to be increased'
- Need for IVA help could increase as expert predicts reduction in lending
- Government announces 'breathing space' for those needing IVA help
- Lack of subprime lending creating need for IVA help, expert suggests
- Information on IVAs might help Britain's debt problem
