IVA Advice Needs May Rise This Year

January can be a difficult month for many people as they try to recover from the cost of Christmas spending. It is predicted that up to 12 million people will continue to use their credit cards in January to pay for their day-to-day living expenses. Using credit cards to pay for everyday bills and costs is often an indication of unmanageable debts. It’s also often a precursor to the need to seek debt or IVA advice.

The Money Advice Trust (MAT) has reported that a fifth of people are finding it tough to manage their debts and predict a massive increase in the demand for debt and IVA advice. This is primarily due to the continued rise in unemployment together with salary freezes. 2011 saw a massive increase in the amount of people seeking debt advice compared with the previous year, though the increase in IVA advice needs did not rise to the same extent.

Strangely, the total number of insolvencies in 2011 was the lowest since 2008. RSM Tenon, who themselves operate in the IVA advice market, believes the reason for this is that many people are currently benefitting from interest rates being 0.5% since 2009. They consider that the money they are saving on their mortgages is helping thousands to keep on top of their debts and avoid the need for IVA advice or insolvency.

Mark Sands from RSM Tenon has said, “Next year we expect the number of insolvencies to hold steady, at roughly 110000. However, when interest rates begin to climb back up – as they eventually will – we can expect a spike in the number of people hitting the rocks.”

It would seem that a general decline in disposable incomes, due to inflation and stagnant pay, is responsible for the unexpected levelling of IVA advice services. Bankruptcy does not require a capacity to repay a set amount towards debts each month, and Debt Relief Orders rely upon there being little disposable income. An IVA requires a commitment to make an affordable sum available each month towards the debts in excess of an individual’s living costs. As disposable incomes decline, it’s possible that debt advice needs have moved towards bankruptcy and DRO options rather than IVA advice options.

Where will this develop from here? It does seem to be important whether interest rates are kept low or whether (or perhaps when) they will start to move back towards a more standard level.

If you currently find yourself in a position where you are struggling to keep on top of your debts you may wish to visit our IVA Advice Forum. As well as IVA advice resources you’ll find information on the wide range of alternatives that exist to bring debt problems under control.

Will IVA Advice Needs Increase in 2012?

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