Ignoring new debt warming may leave consumers needing IVA help

Consumers may find themselves needing to consider individual voluntary arrangements (IVAs) if they fail to heed new debt advice issued as Christmas approaches.

Debt help charity Christians Against Poverty (CAP) has warned people in the London borough of Islington who are in the red against going into deeper arrears by taking out more borrowing to pay for presents and other goods in the festive period, the Islington Tribune reports.

CAP debt counsellor Nicola Vimalanathan said it is often those struggling the most who are tempted to bury their heads in the sand, forget their debt and splash out, noting: “These are difficult times and the temptation is to say: ‘At least we’ll have a great Christmas’.”

She added: “Half of those with out-of-control debt have taken out a loan to cover the cost of the festive season.”

This kind of additional debt can push people not only into severe financial problems but also into depression and suicide, Ms Vimalanathan noted.

For people with very deep debt, the best solution may be to seek an IVA, as this can help avoid bankruptcy.

Used to deal with debts of £15,000 or more, it works by having a deal negotiated between a debtor and their creditors for them to accept a reduced amount of payments – instead of getting nothing due to a declaration of bankruptcy.

This becomes binding on all creditors provided 75 per cent of them agree to it.

As well as loans, a major debt risk at Christmas comes from store cards, associate director of Credit Action Joanna Parsley recently warned.

She said in-store discount offers can often prompt people to sign up on the spot without checking the small print and seeing how much interest and hidden charges they will face.

By Joe White