Individual insolvency levels hit record high

Official figures from The Insolvency Service have revealed that the total number of
people declared insolvent in England and Wales during 2010 reached a record high of
135,089.

Overall, individual insolvencies (IVAs (Individual Voluntary Arrangements),
bankruptcies and DROs (Debt Relief Orders)) were 0.7% higher in 2010 than they
were in 2009.

The figure from 2010 included 59,194 bankruptcies (down 20.7% compared with the
figure from 2009), 50,716 IVAs (up 6.5% on 2009′s figure) and 25,179 DROs (no
comparable yearly data, as they were only brought in during April 2009).

Despite individual insolvencies reaching their highest level ever, though, they actually
fell during the final quarter of 2010 to their lowest quarterly level since the first three
months of 2009. Just 12,049 people were declared bankrupt during this time – the
lowest figure since the first three-month period of 2005.

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Meanwhile, as quoted in the Guardian, Steven Law, president of insolvency trade
body R3, said the figures from The Insolvency Service didn’t shed light on the number
of people repaying their debts through informal debt solutions – including debt
management plans, of which there are thought to be around 700,000.

Individual Voluntary Arrangement can help you get out of debt

If you have incurred debt and are looking for debt solution, you can take help of individual voluntary arrangement (IVA). There are many organizations that can help you with debt reduction and also help your finances stay steady. It’s completely a voluntary option and cannot be forced on you.

What is an IVA?

An IVA is a legal binding between you and your creditor and you agree to make single monthly payment for 5 years. Apart from the payments you can make, the rest of your debt amount is cancelled by the creditor. This is a legal contract and during the agreement, the creditor cannot add any more interest rate or any other charges.

In the IVA, you still have to make single monthly payments but you make the payments which you’ll be able to manage and not more than that. But you must make sure that you follow the rules of the IVA and not fall behind in your payments. If you fail to make regular payments, you may even have to face bankruptcy or may have to pay full outstanding balance as per the creditors.

What are the advantages of IVA?

It completely depends on you when you agree to an IVA. There are quite a number of advantages of paying your debt according to this agreement. Take a look at the advantages of IVA:

1.You get rid of debt after few years.
2.You pay the amount that you can pay and not more than that. The rest of your debt payment is cancelled by the creditor.
3.Singe monthly payment is required in an IVA.
4.Your house and other assets are protected in an IVA and your unsecured creditors cannot ask you to sell off your house.
5.The interest payments are stopped as per the law.
6.You’re not harassed by the creditors for the debt payment.

What are the disadvantages of IVA?

Apart from the advantages, there are also certain disadvantages of this agreement. Check out the disadvantages of getting into this agreement:

1.If you default in your debt payments, it may result in bankruptcy.
2.The equity of your house goes to your creditors. This can be done by extending your mortgage payments toward the end of the IVA. You can also extend your IVA payments for the next 12 months.
3.The creditors may not agree to this payment.
4.The credit rating suffers a lot and the credit score remains low for one year after the IVA.

If you want to go into this agreement to pay off your debt, you must consider all the options before you agree to this legal contract. You do pay off your debts but your credit score suffers and you also need to release your equity to the creditor. But according to the requirement of IVA, you may not be required to sell your house.

Author’s Bio: M.J. is a contributory writer associated with some financial communities and has written several articles for various financial websites. She holds her expertise in the debt industry and has made significant contribution through her various articles.