Credit Squeeze Brings Mixed Blessings to the IVA and Debt Business
With the UK’s householder debt now totaling £1.4 trillion, getting out of this debt has become a serious concern for much of the population. Over the past five years, debt management companies have enjoyed rapid growth as the number of individuals taking advantage of debt solutions. The need for expert advice in this area has never been higher, but the global credit squeeze is having a profound impact on the debt management industry, which could put some companies out of business.
The IVA (Individual Voluntary Arrangement) has become a popular option for individuals in debt, as it involves writing off a portion of the debt, and legally preventing creditors pursuing the indebted individual, who must instead commit to a repayment program, typically over five years.
In 2004, 10,752 UK individuals obtained an IVA. This figure almost doubled in 2005 to 20,293, then doubled again in 2006 with 44,332 new IVAs issued. Debt companies enjoying this growth may have expected the trend to continue in 2007, but instead there was no growth at all, with the number of new IVAs actually falling slightly. Credit problems stemming from the US housing market have brought mixed blessings for the debt industry.
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