Press Release Summary = According to the Department of Trade and Industry, nearly 70,000 people became insolvent in 2005. A third of these people set up an IVA, the new government introduced alternative to bankruptcy.
Press Release Body = According to the Department of Trade and Industry, nearly 70,000 people became insolvent in 2005. This was the highest figure since records began.
Clear Start, the UK Consumer Debt Service blames these figures on the increase in personal debt, which grew by over 10% between 2004 and 2005.
However, the organisation says the government should feel encouraged that around a third of people who became insolvent last year took out an IVA instead of going bankrupt.
The IVA was introduced in 1986 by the government as an alternative to bankruptcy and since then it has been becoming increasingly popular. This is because an IVA, unlike bankruptcy, does not have any stigmas associated with it.
Furthermore, an IVA is beneficial to both creditors and debtors. An IVA offers to make monthly payments based on what the debtor 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 30% of their debts repaid.
From a creditor's perspective, an IVA is preferable to bankruptcy as the costs involved are much lower.
2022
