IVA Causes Investigated

CCCS figures shed an interesting light on the underlying problems that can lead people to the need to use an IVA (Individual Voluntary Arrangement). Anyone who is regularly disturbed by common misconceptions about how serious debt problems emerge will find that the CCCS figure confirm their views. The types of debt problem that can lead to the need for an IVA are generally rooted in events beyond the control of the individual concerned.

First and foremost amongst the causes of debt problems is the loss of work. Unemployment is reckoned by CCCS to be the main factor for a quarter of the people that contact them. As an individual voluntary arrangement requires a monthly contribution it’s unlikely that an IVA will work for someone who is currently unemployed but other options do exist. It’s more likely that someone finding their way back into work will qualify for an IVA if their previous debts remain unaffordable.

Almost another quarter of those reported by CCCS have suffered from a reduced income that has rendered them either unable to repay their debts or using additional credit to plug a gap between their income and their expenditure. IVA advisers have spoken to thousands of people in recent years that have had their salary reduced, lost their overtime, or who have seen their bonuses scaled back. Even if debt repayments aren’t affordable an individual voluntary arrangement may be helpful provided that some money can be paid each month into an IVA.

10% of debt problems stem from over-commitment with a further 5% suffering from a lack of budgeting skills when it was required. Classically this is the type of scenario that an IVA deals with. People have borrowed money but simply cannot keep up with the full repayments any more. They can pay towards their debts, but not enough. An IVA is often an ideal compromise in such a situation with creditors often accepting that the full debt amount cannot be repaid. An individual voluntary arrangement recreates the link between income and budgeted expenditure which means an IVA that deal with the old problem without risking a new one.

Almost 10% of debt problems arise from separation. If there have been joint debts such a situation can be especially fraught as each party is joint and severally liable. Where one party goes ahead with an IVA, the other is likely to be lumbered with the full repayments on joint debts. This can create a domino effect where the other party then needs to look at options like an IVA also.

Nearly 10% of people also struggle with debt following their experiencing illness or injury. While continuing to suffer in this way, without a full income, it’s likely that an IVA will not be the answer. This is because an IVA payment usually needs to be made each month after other essentials have already been prioritised and paid. However, an individual voluntary arrangement may be helpful once someone is recovered and back in work.

The key point behind these statistics is that there is an answer for every debt problem, no matter what the causes or current circumstances are. An IVA is one option, but alternatives to an IVA are numerous and include debt management plans, debt relief orders, bankruptcy, budgeting or refinancing of secured debt on assets. Any good debt or IVA adviser will be able to help you find a solution (and more often a choice of solutions) so there is little point in struggling on without assistance.

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