IVA’s tipped as top debt solution

For many people, an individual voluntary arrangement (IVA) can be the best solution to deal with debt, according to one expert.

Commentator and founder of the Money Magpie finance website Jasmine Birtles said such arrangements are good for the “right person” as a means of bringing debt under control.

She remarked: “It’s something that should work very well because it means that the debtor doesn’t lose everything and the creditors get something.”

Ms Birtles noted those best suited to an IVA could be consumers with a small number of creditors, as that may make it easier to get 75 per cent of them to agree to the deal, while also observing the need for a debtor to still have the income to meet the reduced payments.

One major advantage of an IVA, the expert noted, is that while it does have a negative effect on a person’s credit rating, it is not as severe as that affecting someone who has become bankrupt.

Such advice could be particularly pertinent in the year ahead, as according to Ms Birtles this will see a large rise in the number of people becoming insolvent, following a relatively low number doing so in 2010 due to the way low interest rates have helped many consumers.

Figures from the Insolvency Service show the number of people getting into such a situation has fallen quarter-on-quarter through 2010 so far, but there has been a shift towards IVAs and away from Bankruptcy.

In the third quarter of the year, the number of individual bankruptcy orders was down 7.2 per cent on the previous three months, whereas the number of IVAs only dropped by 3.8 per cent.

By Amy White