IVAs 'inappropriate for many people'
Published On 3 May 2007
Many people in the UK should have opted to go bankrupt rather than choose an IVA, according to an industry expert.Philip Long, a leading insolvency practitioner with PKF Accountants, said that many people were being 'mis-sold' IVAs when bankruptcy could have been a better option for them.
As a result of this, Mr Long predicted that insolvency figures, due to be published later this week, will show sharp increases due to recent interest rate rises.
Mr Long also claimed that the majority of the 44,331 people who entered into IVAs in 2006 will be forced to declare themselves bankrupt before the end of their agreement.
"Most people who entered into an IVA last year would have been better off being declared bankrupt rather than struggling and, ultimately, failing to make payments to their creditors," he explained.
"No-one is pretending that bankruptcy is a good thing but the reality is that, in the majority of cases, the terms of IVAs are too much for most people in serious debt to cope with.
According to Mr Long, most of the people who opt for IVAs have already proved they are no able to manage their finance effectively. This means that expecting "these people, who are often on low-incomes, to exist on extremely tight budgets for an extended period is quite frankly expecting too much".
Figures from Credit Action show that personal debt in the UK reached £1.3 trillion at the end of February.
