Debt management, Insolvencies and Statistics

Debt Management and IVA’s are the most patronised forms of debt management in the UK today. The times online has reported that around 150,000 people enter into debt
management plans every year. Debt management plans are a flexible arrangement between the creditor and the consumer whilst IVA’s are legally binding and stretch over a period of five years.

To qualify for a debt management plan one must have to owe a minimum of about £1,000 in unsecured debt and a minimum of two creditors. Where IVA’s are concerned, one will need to have a minimum debt of £15,000 in unsecured loans and a minimum of three creditors. This has become a very common solution for debt relief in the UK as consumers find it very easy to hand over their debts to a management company to deal with themselves. This is a very interesting trade off as by the time the consumer would have thought of a debt management program the creditor would have sold the debt to a debt collection company.

Debt collectors are known worldwide for the harsh methods used to retrieve debt and as such no one will like to be in that situation or predicament. The consumer is quick to pass on the debt to a debt management or IVA company to deal with the creditor on their behalf. The advantages are very clear, the companies act as a shield protecting the client as the debt collectors can no longer deal with the customer but deal only with the debt management company acting on the clients’ behalf. The results are quite successful as in the end the consumer almost always pays of the debt through the debt management or IVA company.

During this credit crunch, consumer expenditure has reduced simply because of the scarcity of money. Large financial institutions have collapsed, companies have shut down and these have triggered large scale job losses. A research carried out by Price Water House Coopers titled precious plastic on consumer credit reported that “despite the fact that UK consumers have called a halt to increases in their debt levels, they still remain noticeably high in comparison to the rest of Europe “(Price Water House Cooper, 2010 Precious Plastic Report).

The average household in the UK have a debt of £58,320 including mortgages (Money Advice Trust, 2009).

As Price Water House Coopers research suggests, of all these debts £50,000 are secured debts and £10,000 are unsecured debts (Price Water House Cooper, 2010). It also said that “these debt levels mean that average households will have to spend approximately 15% of net income purely to settle the interest payments arising from these debts.“

Since 6th April, 2009 the government launched a programme called the Debt Relief Order which is designed to assist consumers with less that £15,000 in debt with minimal assets in paying back their creditors without filing for bankruptcies. It seems that debt educations programs, debt management, IVAs and Debt Relief Orders have become the consumers’ way out.

While i advice consumers on a daily basis on their debt issues, they ask me.."when is all this going to end?" "WHEN IS ONE GOING TO WAKE UP AND BE DEBT FREE" The answer is .....well! i wish i did at this point. However citizens, i the ever so optimistic advisor believes that there is a WAY OUT! Don't miss the concluding part of An Investigation into Consumer Credit and the Way Out!

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