Falling Debts and Disposable Income Affecting IVA Advice

The UK personal credit marketplace has changed greatly in the past few years. It’s now harder to borrow large sums on an unsecured basis and many people are feeling a big squeeze on their disposable income and living standards. Both factors are changing the IVA advice environment.

TDX (who represent creditors in post IVA advice procedures) have produced some interesting statistics based upon their experience of IVA proposals in 2011. The information can be taken to be indicative of the whole market as TDX are involved in 90% of IVA cases.

Insolvency numbers declined in 2011 compared to the previous year, but this is mostly down to fewer bankruptcies transpiring. High numbers of people continue to take IVA advice, and proceed with an individual voluntary arrangement thereafter, though the total is slightly down on last year.

Those choosing to go ahead with an IVA after individual voluntary arrangement advice seem to have different circumstances than they used to; changes which reflect the amendments to the UK personal credit market and the general economic woes we are suffering currently.

This is evidenced by the average debt level of someone in an IVA reducing from around £50000 (2007) to £40000 (2011). It would seem that those taking IVA advice are no longer able to add additional debt as freely as would have been the case in the past. There may be alternative explanations however. For example, growing public awareness of IVAs may have encouraged more people to seek out IVA advice who previously may have only been informed about informal debt management plans.

The average disposable income identified when a person seeks IVA advice is also in decline. TDX report that between 2010 and 2011 the number of people paying £175 or less into their IVA each month has doubled. Four times more people are making an IVA payment of £175 or less than was the case in 2007.

It’s likely that this reflects the general trend of falling disposable income as high consumer inflation eats into stagnant average salaries.

IVA advice providers appear to have become comfortable with managing IVA cases with lower levels of debt, and lower monthly contributions, than was previously the case. Whether or not this represents a positive development is up for debate between the various stakeholders in the processes. However, those taking IVA advice appear more likely to be able to proceed with an individual voluntary arrangement than was the case a few years ago based upon these updated acceptance criteria.

Latest News

IVA Firms