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IVA : Creditors Face £1.4 Billion Write Off
Creditors face having to write off up to £1.4 Billion in bad debts due to the number of people who entered into IVAs, individual voluntary arrangements, in 2006, according to a report in The Sun newspaper today.
The article also quotes that :
"KPMG says that 45,000 people used the Individual Voluntary Arrangement (IVA) procedure to write off a portion of their debts in 2006."
"A further 65,000 were declared Bankrupt, taking total personal insolvencies to a record 110,000."
It has been reported recently that the number of Individual Voluntary Arrangement (IVA) applications has overtaken the number of bankruptcy petitions in the final quarter of 2006, which has caused alarm in the banking industry.
The creditors are attributing the large increases in Individual Voluntary Arrangements (IVAs) to the pro-active selling of Individual Voluntary Arrangements (IVAs) by large debt management companies and Individual Voluntary Arrangement (IVA) factories, who have recently recognised the large financial benefits that Individual Voluntary Arrangements (IVAs) can generate.
In an attempt to reduce their loses, creditors are introducing tighter controls on the minimum criteria needed for an IVA to be acceptable. At the same time, they are applying pressure on Insolvency Practitioners to reduce the fees they charge for Individual Voluntary Arrangement (IVA) services and also change how and when the Individual Voluntary Arrangement (IVA) fees become due.
Creditors are hoping that by making it more difficult for a debtor to enter an Individual Voluntary Arrangement (IVA), whilst also by making the Individual Voluntary Arrangement (IVA) a less lucrative product for debt management companies and Individual Voluntary Arrangement (IVA) factories to supply to debtors, that they will in turn be able to significantly reduce the number of people entering into Individual Voluntary Arrangements (IVAs) in 2007.
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