Adding to the ongoing debate amongst IPs, regarding the accessibility of IVAs and reducing disposable income thresholds for IVA eligibility, is the latest release from the UK’s leading provider of data and technology driven debt solutions, TDX.
The company has revealed IVA figures for 2011, which showed a reduction of 8 per cent in volume in comparison with a record year in 2010. TDX has high visibility – over 90 per cent of all IVA cases – via TIX, the UK’s largest IVA servicing Platform.
However, whilst the volume of IVAs was down, the percentage of all insolvencies represented by IVAs increased because they fell less dramatically than bankruptcies.
Martin Prigent, Head of External Relationships, Financial Difficulties at TDX, said: “It is important to remember that this decline in volumes is in comparison to record highs in 2010 and volumes still remain significantly higher than in 2009. There is no sign of a recovery in consumer finances so the IVA will remain an important tool to manage distressed debt.
“TDX data shows that the proportion of people paying less than £175 per month almost doubled in 2011 and more than quadrupled since 2008.”
Kevin Still of APDSI commented, “There are some encouraging signs from the TDX release notably that indebted consumers with high levels of unsecured debt are seeking debt advice earlier before debts spiral any further.
“Lender forbearance is also critical and the recent release of the updated Finance & Leasing Association (FLA) code is welcomed with increased provisions in the section of dealing with clients in financial difficulty and limitations on the number of repeat short-term loans.”
Also highlighted by the company was the fact that last year consumers entered IVAs sooner, owing an average of £40,000 compared to £50,000 back in 2007.
Martin added, “The IVA market is challenging for the industry – but IVAs are more accessible than ever, with a diverse group of individuals being offered a structured and controlled route to navigate their way out of financial difficulty.
“We have also seen a marked increase in the volumes of consumers re-negotiating their plans. This clearly shows insolvency practitioners working hard to provide over-indebted consumers with a viable and robust way out of debt problems.
“With debtor contributions falling, insolvency practitioners are having to focus on efficiencies. While some have exited the market, there have also been a number of new entrants and the top 20 have grown their market share. Overall, the IVA remains a robust, accessible and fair solution for all parties involved.”
Kevin continued: “The reduction in the average disposable income requirements and the sustainability of household income for a viable IVA are interesting, as these have always been seen to be the traditional strengths of a Debt Management Plan (DMP), where an informal debt solution can quickly adapt to changes in circumstances.
“The continued erosion of disposable income may mean that there are more creditors’ meetings to vary the terms of an IVA or allow the IP to use their discretion to maintain an IVA, with the potential for increasing the term.”