IVA Applications on the Rise
The number of IVA applications has increased sharply over the last 5 years, according to the Insolvency Service, an executive agency of BERR, although it appears to have reached a plateau in recent months.
A number of factors have been blamed for this increase:
- Rapidly increasing house prices have created an artificial goodwill feeling of wealth and prosperity as equity values increased which his has fuelled consumer retail spending.
- The lending market has been deregulated and competition increased. Before the recent credit crunch, many commentators were stating that it had never been easier to borrow money. Lending criteria were lax and the affordability of loans not considered a priority.
- As well as irresponsible lending there has been irresponsible borrowing.
- A number of IVA bulk providers have aggressively advertised the availability of IVAs which some creditors have argued has encouraged some debtors to choose the option of an IVA whereas previously they would not have been aware of the existence of an IVA.
All of the above is true, but it is unfair and incongruous for creditors to blame the IVA providers for the increase in IVAs. It was not the IVA providers who provided the credit that caused the problem of over-indebtedness in the first place.
The growth in IVA numbers is as a result of specialist debt solutions providers adapting their product offering to satisfy a need in the marketplace.
Indeed, excluding secured debts (i.e. mortgages), consumer unsecured credit has increased almost exponentially to £230 billion at April 2008 according to the Bank of England. Where a household has unsecured debt the average is £21,450.
More and more debtors are struggling to make their unsecured debt repayments.