IVA & Debt Consolidation Advice

Some unethical lenders are taking advantage of problem debtors by forcing them into expensive "consolidation loans." These lenders are refusing to approve any individual voluntary arrangement(IVA's), a bankruptcy alternative that allows a debtor to repay a portion of his debts over several years, while the lender writes off the remainder.

These unscrupulous lenders use the knowledge they have of people's financial status in an attempt to sign them up for a master loan with a high interest rate that is sometimes secured by an interest in the debtor's home.

Though the practice is not illegal, it may be “immoral” according to Peter Sargent, a council member of R3, the trading body of insolvency practitioners. One anonymous insolvency source voiced the opinion that it is an abusive practice by creditors.

This practice has advantages for the ruthless creditors aside from the fact that they do not have to write off any of the money that is due to them from debtors. First, they are in a position to charge more for a debt consolidation loan. Second, they have the option to attempt to secure it using the debtor's home. Thirdly, unlike an IVA, there is no need for a lender to consider it as a problem loan.

Sargent is a partner with the insolvency firm of Begbies Traynor and advises anyone who is in financial trouble not to borrow any more money.
In 2006, there were 44,332 IVAs filed in England and Wales compared with 20,293 in 2005.