Debt figures reveal write-off levels

New statistics may indicate how some people are managing to become debt free by using individual voluntary arrangements (IVAS).

Credit Action’s latest monthly figures for the state of consumer debt show that £182 million of money owed is written off every day, of which £24.88 million is in the form of loans to banks and building societies.

Such debt is often written off when an individual becomes bankrupt or insolvent in some other fashion, something the body said happens to an individual every 4.28 seconds.

While bankruptcy may lead to large amounts of debt being written off, so can an IVA, with the consequences for a credit rating not being so dire.

An IVA involves an agreement being drawn up with creditors to pay them back a reduced amount over a period of five years or less, something that is binding on all of them provided three quarters of those owed money agree to the deal.

When this period ends, anything left owing is written off if the payments have been maintained.

The Credit Action data also showed there is a repossession somewhere in the UK every 17 minutes, but an IVA can help save a house from being lost.

Other findings in the survey included the average UK family debt (including mortgages) being £57,697 and £1.156 billion being spent on plastic every day, potentially adding heavily to credit card debt whenever that is not paid off in full before the interest-free period ends.

Concern over debt is so great among some people the Consumer Credit Counselling Service debt hotline received almost 50,000 calls between midnight and 07:00 last year from consumers too troubled by their debts to sleep.

By James Francis