IVA & Debt Consolidation Advice

Student Debt Soaring at an Alarming Rate

2007-07-18T06:45:00.000+01:00

The amount of money students borrow to finance their education is three times higher than it was a decade ago. It has reached an alarming £18 billion and is likely to soar even higher with the new £3,000 annual top-up tuition fees. Depending upon your course of study, these fees can push the estimated cost of obtaining a degree to more than £33,500.

According to figures submitted by Student Loans Company, during the last financial year, new student loans totalled more than £3 billion, a remarkable increase over the £941 million they borrowed in 1997. Of that amount, almost £400 million was required in order to cover £3,000 annual fees, the amount that most universities charge. The total amount due on student loans from both graduates still paying on their loans and current undergraduates is £18.125 billion. Critics of top-up fees claim that they are putting an additional financial burden on students.

The National Union of Students believes that this fee could increase typical graduate debt to £30,000. The government, on the other hand, estimates that debt could rise from the current £8,500 to £15,000. This estimate only takes into consideration debt that is owed to the Treasury where loans to students are subsidized and students pay zero interest rates. In 1997, the average student debt was under £5,000.

Students are allowed to borrow £7,405 each year from the Student Loans Company. This includes a £3,000 tuition fee loan and a £4,405 loan for living expenses. Many students supplement their Government loans with overdrafts or by taking loans on their credit cards.

Last autumn tuition fee reforms raised student fees from the previous £1,175 a year. Students are not required to pay the fees at the start of their courses and can wait until they earn £15,000 before they repay zero-interest rate loans they take to cover the charges.

Education spokesperson Sarah Teather commented that the total student debt is higher than gross domestic product of Slovenia. However, Higher Education Minister Bill Rammell said that student loans are the safest and most effective means for students to finance their education. He goes on to say that students are borrowing only the amounts to which they are entitled and are not going beyond their means.

UK at the Top of the Debt League at £1 Trillion

2007-07-12T08:17:00.000+01:00

The UK's debt burden has reached a record £1 trillion, making Great Britain the most indebted nation in Western Europe, according to recent statistics recently presented to a conference organized by Citizens Advice Scotland and the Debt on Our Doorstep Campaign. Their aim was to examine the reasons why citizens in the United Kingdom have such overwhelming debt levels. Delegates to the conference were also told that household debt levels are now at £1.3 trillion and increases by another £1million every four minutes.

Debt on Our Doorstep stated that the debt repayments of the poorest 40 per cent of households is more than triple the amount the richest spend.

The conference was held in Edinburgh and included more than 100 delegates as well as guests from the European Coalition for Responsible Credit. CAS chairman, Graham Blount stated that Britons have the largest debt load in Europe with people on lower incomes paying a higher price on debt repayments than those from wealthier households.

The conference intended to investigate why Britons are so heavily indebted and what can be done to create more affordable and responsible borrowing in Britain. The conference was attended by high-profile participants, which included the new Executive Communities Minister for Scotland, Minister Stewart Maxwell. Other speakers at the conference included Damon Gibbons, Debt on Our Doorstep chairman and Mark Lazarowicz MP, All Party Parliamentary Group on Personal Finance chairman.

Results from the conference's investigative research will be used at another European debt conference that will be held in Brussels in September 2007.

Bankrupt Britain Faces Mountains of Debt

2007-07-10T07:29:00.000+01:00

All across Britain debt is spiralling with many borrowers unable to afford their repayments. Just this year 17,000 filed for insolvency. According to the Insolvency Advisory Service, people are seeking debt relief through bankruptcy at younger ages with debts that are becoming increasingly larger.

During the first three months of 2007, 17,000 filed bankruptcy, which is an increase of ten per cent over 2006 figures, thus adding to the 100,000 individual insolvencies that were filed in England and Wales.

Gill Hankey of the Bankruptcy Advisory Service says the she recently met with a 21 year old client who was seeking help for credit card debts of £35,000 and is just one of many such cases that the bureau has on its books. They also saw a client with an income of £900 a month who had 17 credit cards and another who had filed bankruptcy and was about to borrow £80,000 on credit cards. Hankey says that cases like this show that lenders are failing to conduct proper checks before approving credit cards and loans.

High Street banks and credit card issuers have taken an increasingly tougher line on debtors. Recent government figures showed that county court judgments were higher than they have been in ten years, with 70 per cent of those judgments related to consumer loan and credit card debt. Lenders are quicker to use the court system to deal with debtors who have unsecured obligations, and the seriousness of these figures are a warning to borrowers that not only are their credit ratings at risk but also further legal action is not very far down the road.

Debt advice agencies report they are seeing an increase in the number of clients who have tried not to file bankruptcy, but are struggling with Individual Voluntary Arrangements (IVAs) with payment plans they can ill afford. Under an IVA, a debtor makes monthly payments over five years in exchange for the creditor agreeing to write off a portion of the debt. The IVA company charges a fee for their services, which is deducted from the repayments, usually about £7,500. Some people are making payments of 45 per cent of their take home pay on IVAs, which leaves them with very little left on which to live and take care of their families. These repayment plans are not affordable, and many people begin to struggle after making only one or two payments, so they end up doing what they had tried to avoid, filing bankruptcy.

Both the Consumers Credit Counselling Service and National Debtline, a telephone helpline for people who need debt advice, have said their experience shows a similar trend and that there is likely an issue with recommending people for IVAs who should clearly never have been recommended for the program.

For many people who have a large debt load without available income to pay them, bankruptcy may be a more realistic option than an IVA according to Sue Edwards, a senior policy officer for Citizen's Advice.

Debtsolver have written an article on the pros and cons of an IVA versus bankruptcy.

It’s only a general guide though, and people facing insolvency are urged to seek professional debt advice.

Carers in Northern Ireland Face Debt and Ill Health

2007-07-06T09:53:00.000+01:00

A leading carers' organisation has warned that carers in Northern Ireland face a future that is riddle with debt, worry, and health problems according to survey results throughout the UK. The survey, based on 3,000 carers, suggests that those who care for a disabled or chronically ill relative or friend can expect to face severe financial penalties. According to survey results, carers were forced to make cuts in food, heating and clothing, give up their jobs and sacrifice their pensions. Just in Northern Ireland, carers' support is worth £1.9 billion a year.

Helen Ferguson, director of carers NI, is seeking an overhaul of the current benefits and tax system for carers. She says that the carers' benefits were designed in the 1970s when things in the world were much different. Because of significant changes since then, she says a complete overhaul of the system is necessary.

Ms. Ferguson feels that there is a need to invest heavily in social care so that carers and their families can partake of things that other people take for granted such as going shopping, having a weekend break, taking classes, or working.

Ninety-three per cent of carers who responded to the NI survey said their financial situation had deteriorated since they became a carer. This compares to an average of 73 per cent in the UK as a whole. Approximately 48 per cent reported having difficulty paying gas/electricity or telephone bills and were or had been in debt.

The survey also showed indications that parents of disabled children under 18 and those who were caring for adult children who were disabled had more debts and financial difficulty than most others.

Ms. Ferguson further stated that the National Carers Strategy review that was announced by the British government would provide the perfect opportunity to review the current tax and benefits system for carers.

Sharp Increase in the Number of UK Citizens Going Bankrupt

2007-07-02T08:55:00.000+01:00

Can a local council force an individual into bankruptcy because they failed to pay their council tax? Will others know that you have gone bankrupt? Does a bankruptcy show in your credit file? Will filing bankruptcy affect your chances of finding a job?

According to the latest report, there was another steep rise in the number of people with county court judgments registered against them in 2006—a total of nearly 850,000 consumers. With more consumers incurring these judgements, many will see bankruptcy as an easy way to escape the CCJs.

For the first time in the UK, reports showed that more than 100,000 people filed for bankruptcy in 2006. In addition, government figures showed that 15,356 people filed bankruptcy and 11,299 filed IVAs during the first quarter of 2007.

Online credit information provider, Equifax, has expressed concerns that many consumers are unaware of the implications of filing bankruptcy, but rather see it as an easy way to get out of debt without any real consequences.

The 2002 Enterprise Act changed the law where the debt's of a bankrupt individual could be written off after one year instead of three, however, this change caused a number of people who had been struggling with debts to view bankruptcy as an attractive option for wiping the slate clean and starting over. What they don't understand is that even though the bankruptcy will be cleared after one year, the record of the bankruptcy filing will remain on their credit file for six years, which could have serious implications on their financial futures.

Lenders use an individual's credit file when they review an application for credit or loans. A record of bankruptcy can cause them to be declined or force them to pay a premium interest rate. It can also affect a person's ability to get a job or even a mobile phone since a credit agreement is taken out for line rental.

Lenders Taking Advantage of Debtors

2007-06-28T08:34:00.000+01:00

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.

IVA Firms Agree to Revisions in Fee Structures

2007-06-26T08:13:00.000+01:00

IVA companies recently agreed to spread out their fees over several years after pressure from Britain's major banks concerning their charges. IVA companies, intermediaries, and creditors agreed to a meeting in order to address some standard guidelines concerning the fee structure, advertising, and advice that the IVA companies offer to people who are seeking relief from their debts.

This agreement follows a large increase in the number of people seeking to take out IVAs, a program that allows debtors to write off a portion of their debt while repaying the remainder over several years through an agreement drawn up by an IVA provider. Creditors have been critical of some providers, saying they take too large a fee, don't advertise in a responsible way, and fail to offer the best advice to the debtors. In light of the recent agreement, it is likely that the fees IVA providers charge will be spread over the period of the arrangement instead of being paid at the start of the arrangement.

According to Eric Leenders, executive director of the British Bankers' Association, the agreement has been reached to recalibrate the structure, but they have to get more details on a final agreement. It is expected that the changes will be implemented within the next six months. There was no discussion about setting a standard fee for an IVA.

Some banks such as HSBC have gotten tough on how much they will pay IVA providers. Capitol One has stated it will no longer pay more than 4,500 pounds for any one IVA. Currently providers receive about 7,000 pounds for each IVA according to estimates.
As of the end of March, there were 48,000 IVAs, an increase of over 80 per cent from the previous year.

Debt Experts Fearful Over Increase in Number of Court Cases

2007-06-21T08:15:00.000+01:00

Several consumers groups are concerned that creditors are becoming too quick to take court action rather than attempting to negotiate with debtors. This is in light of new figures that show county court judgments (CCJs) for non-payment have risen to a level that is approaching a 10-year high.

During the first three months of 2007, 247,187 CCJs because of consumer debts were issued. The last time the totals were this high was during the summer of 1997. Debt experts believe this increase is a combination of householders being under greater financial pressure and creditors being more willing to use the courts instead of negotiating with debtors in order to reclaim what debtors owe them.

A total of 296,841 CCJs were issued during the first quarter of this year. That figure includes those served on businesses and is a 9.1% increase over last year according to figures that were issued by the Registry Trust.

Peter Tutton, national debt policy officer for Citizens Advice is critical of how willing creditors are to utilize the court system. Their concern is that creditors failing to even attempt to negotiate with debtors, choosing instead to use court action. He also expressed concern that if new legislation passes making charging orders easier to obtain, the trend will continue in the future. Citizens Advice Bureau handled close to 1,500,000 debt problems over the last year.

Mr. Tutton is also concerned about proposed changes that would make it easier for bailiffs to enter people's home forcibly because of their debts. Because court action adds to the costs and financial hardship that people with a great number of debts already face, he feels that creditors should be more willing to work with debtors by negotiating according to industry standards before taking court action.

CCJs are issued when either individuals or companies fail to repay their debts. According to the Registry Trust, approximately 70 per cent of judgments are related to debts with the remaining 30 per cent being issued by the Driver and Vehicle Licensing Agency, water companies, and HM Revenue and Customs.

A debtor who fails to comply with the repayment terms of a judgment will be placed on the CCJ register for six years. This will make it more difficult for debtors to borrow money or obtain a mortgage.

The results of recent research showed that fifty per cent of Britons admitted they made serious financial errors and lack financial control over their spending. Research from CreditExpert.co.uk shows that more that 80 per cent of people in the UK overspend on a regular basis and millions have at least considered measures such as bankruptcy.

New Law Causes Concerns for Debtors

2007-06-19T08:07:00.000+01:00

According to Citizens Advice, a new law can put people in England and Wales with debt problems at risk of losing their homes. In the future, a creditor will be allowed to place a lien on the property of debtors even if the debtor has kept up the repayment schedule determined by the court. This change will close a loophole in the law that has allowed homeowners to avoid repaying their debts when they sell their homes though there will still be protection for vulnerable debtors.

At the present time, creditors can recover their money when a homeowner sells his or her property as long as they obtain a Charging Order from the court. They can only do this in the event that the debtor is in default on the payment plan, called a County Court Judgment. Under new proposals that are outlined in the Tribunals, Courts and Enforcement Bill, a homeowner will not have to default on the payment plan for a creditor to obtain a Charging Order.

Sue Edwards from Citizens Advice told BBC Radio 4s Money Box that she has concerns with the bill because even though in most cases a Charging Order means a debt is repaid only when a debtor sells the property, cases may arise where an owner is forced to sell in order to repay the debt. She further goes on to say that if the government intends to make changes, it also needs to make sure that people who can only afford to repay small amounts do not lose their homes.

Citizens Advice says that its bureaus are reporting an increase in the number of firms who are opting to obtain a Charging Order even when a debtor is ready to make repayments. The fear is that any effort to simplify the process will encourage the trend.

Malcolm Hurlston from the Consumer Credit Counselling Service urges all companies to use restraint with any new law. He further states that if the new law is used as a "blunt instrument," it can be dangerous because it gives creditors the power to turn unsecured debts into secured debts.

The government says the change is necessary because of the number of people who with large debts selling properties and keeping the money instead of using it to repay their creditors.

The Ministry of Justice told Money Box that there will be provisions made for vulnerable debtors by imposing a minimum threshold below which no Charging Order can be imposed or a demand for sale made. The thresholds have not yet been set.

Jeremy Sutcliffe, chair of the Civil Court Users Association, sides with the creditors who say they are frustrated by homeowners who claim they don't have the cash to repay their debts. He goes on to say that people's assets are now in their homes, and that the creditors should have a reasonable opportunity to be paid by their debtor through the use of that asset.

Boom in Insolvencies Blamed on IVA Factories

2007-06-14T10:04:00.000+01:00

The number of people filing for insolvency is on the increase – during the first three months of year, 30,000 people filed bankruptcy or entered into an individual voluntary arrangement (IVA). The reasons behind such sharp increases are a different story totally.

In 1998, there were 24,500 insolvency cases filed. Of that number, 5,000 were IVAs, a formal agreement where the debtor negotiates with the creditor to pay back a portion of the amount of debt owed. The remainder of those were bankruptcies, which required the debtor to sell everything including their homes, in order to settle their debts.

The figures remained fairly constant until 2004 when insolvencies suddenly experienced a sharp increase to 46,650—15,000 bankruptcies and almost 11,000 IVAs. They have doubled again since then with 107,000 insolvencies in 2006 of which 44,000 were IVAs. During the first quarter of 2007, 16,842 bankruptcies and 13,323 IVAs were filed making a total of 30,075 insolvency filings.

According to James Ketchell of Consumer Credit Counselling Service (CCCS), this sharp increase in filings is the result of the IVA factories that began to appear in 2004. Ketchell uses the term "IVA factories" to denote the influx of friendly-face companies that began operations in order to take advantage of the consumer-credit boom in the UK. Through the use of extensive television advertising, they target people with more than £15,000 of unsecured debt (credit cards and personal loans), and offer them an opportunity to become "debt free easily."

These companies then negotiate with the lenders, offering deals of 25 pence on the pound, and then charge set up fees of up to £1,500 for suing their services The lender gets a small amount of their money back, and the borrower is relieved of all but about a quarter of their original debt.

Based on that information, it appears that the IVA companies have created the market. They were originally intended for failing entrepreneurs, but now it is mostly individuals who have unsustainable debts that are using them.

In spite of the substantial rise in IVAs in the past two years, Ketchell doesn't see the figures as being indicative of a potential debt crisis. He is confident that consumers are savvy, and indicates that credit card balances have been declining since last year, with the majority of consumers tightening their belts in light of projections of increases in interest rates.

Ketchell also feels that any concerns over a spendthrift generation that will run up huge credit card bills with a "living now" adage are unfounded. Even though the average CCCS client has unsecured debt of £31,000, over half of the cases are because of an unmanageable situation because of a change in circumstances such as divorce, redundancy or illness. He doesn't deny that some overspending on credit cards occurs, but he feels it represents a minority among the range of situations that cause debt problems.

He says the increasing insolvency figures can be blamed on the rapid expansion of the IVA companies, and recent figures show that there is a decline in the growth rate of insolvency filings.

In spite of the post-Christmas boom that traditionally affects the number of insolvencies, a decline of 1.3% was reported during the previous quarter while new IVA filings at least grew at a slower pace.

Currently the IVA market has reached a level of maturation. CCCS expects the figures for insolvency to reach 50,000 by the end of the year and then reach a plateau.

Some people don't agree with Ketchell, however. Howard Archer who is chief economist for Global Insight, a city research firm, says that even making concessions for the emergence of IVAs making it easier for people to file for insolvency doesn't change the fact that a great many people have borrowed to the maximum and are now in a position where they have difficulty managing their debt loads.

The rising number of IVAs has been of concern to the British Bankers Association(BBA) for quite a while. They are not saying that IVAs do not serve a purpose in some cases, but their concerns are with three major areas that have become more troublesome since marketing schemes that promote them as a "get-out-of-debt-free card;" advice that may not be in the best interests of the debtor; and the structure of the costs.

Because IVA companies place all fees at the front end of the contract that means that means none of the payments are applied to the loan until after the first year during a normal five-year agreement. Debtors who later find themselves in a position to pay off their indebtedness early are chocked when they discover that everything they have paid has been applied to IVA charges and nothing to the actual debt.

The BBA is concerned that the some companies are encouraging people to enter into IVAs who would be better off filing complete insolvency and utilizing the more drastic action of filing bankruptcy.

Since the government's decision last year not to regulate the market, the BBA has taken it upon itself to develop a self-regulating set of protocol for the entire IVA industry. They have received positive response from the industry based upon the assurance that it is of benefit to them as well as the debtors. They are anticipating that the new protocol will be in place by summer of this year, with one of the top agreements being that of ceasing misleading advertisements that tend to encourage people to write off debt when it isn't necessary.

Ketchell is in favour of the move, but he also states there must be more responsible actions on both sides. Of course, no matter what kind of protocol is written, the real responsibility for managing debt will remain with the individual.

Bankruptcy or IVA – Which Should You Choose?

2007-06-07T10:24:00.000+01:00

During the last quarter of 2006, nearly 30,000 people in the UK filed for bankruptcy or an individual voluntary arrangement(IVA). That calculates to nearly 300 per day, an increase of 60 per cent over 2005 figures and a 7 per cent increase over the previous quarter according to figures released by the Government's Insolvency Service.

The bulk of the figure is from people filing bankruptcy, but the number of people in the UK entering into IVAs is growing at an alarming rate as well. Although the number of bankruptcy filings increased by just over 30 per cent in 2006, the number of IVAs more than doubled, and projections are that during 2007, IVAs in the UK will exceed bankruptcy filings for the very first time. There is a great deal of confusion over how each one works and what you will be required to pay.
Bankruptcy
When you file bankruptcy, the law declares you are unable to repay your debts. You have to file a petition in court, and if it is approved, your assets will be distributed to your creditors to settle a portion of what you owe. There is a £150 court fee and a fee of £325 to the Insolvency Service. If you are receiving benefits, you can apply for a waiver of the court fee. There are ongoing costs if you have property to be disposed of, but those costs will be deducted from the proceeds of the sale.

Although you can be discharged from bankruptcy in the UK after a year, it will remain on your credit record for six years. Though it may seem advantageous to file bankruptcy and have all of your debts discharged completely, if you have a home, you will likely lose it in the process. In addition, your credit rating will be affected for at least six years, you name and address will be published in the local newspaper, and you will be unable to pursue certain professions, such as accountancy.

You should always consider bankruptcy as your last option, but for those UK residents who have substantial debts and no assets, it may be the best option for protection from creditors. For those with assets, an IVA is the best choice.

IVA

An individual voluntary arrangement, or IVA, is a formal and legal agreement between a debtor and his creditors. It is drawn up by an IVA specialist in the UK that works with you and your creditors to reduce the amounts you need in order to pay off your debts. Under the agreement, interest is frozen.

The fees on IVAs can vary from firm to firm, but the typical fees are approximately £7,000, which includes a set-up fee of £2,000 plus an annual supervisory fee. The fee has no bearing on the amount of the debts that must be repaid monthly because the insolvency practitioner will work out a payment plan that you can afford over a five-year period, and the fees will be deducted from that amount. Unlike bankruptcy, seventy-five per cent of creditors must agree to the proposal before it can move forward because it means they will have to write off some of debt that is owed by the debtors.

An IVA has several advantages over declaring oneself bankrupt for many people, especially in the UK where one can on retain assets such as property with an IVA. In addition, there is no publication, and sometimes a debtor is relieved of as much as half of his original debt.
On the down side, if the IVA fails in the early years, you probably have not paid much toward the original debt since the majority of that money goes toward the firm's costs.

Everyone’s circumstances are unique though, and anyone struggling with debt issues is advices to take professional debt advice.

Debt and Savings Divide North and South

2007-06-05T08:06:00.000+01:00

Liverpudlians, Geordies, and Glaswegians are less likely than other Brits to make any substantial decrease in their credit card debt, while Norwich houses Britain's best savers. According to a recent report on attitudes toward debt and savings that was compiled by data analysts CDMS, almost one in six Liverpool residents never pays anything on their credit card debt but the accumulated interest.

In addition to Liverpudlians, the league table of worst repayers – also called "credit cruisers"— includes Newcastle, Manchester, and Glasgow. According to CDMS, residents of those cities suffer from a widespread accumulation of credit card debt. On the opposite side of the spectrum are those from Edinburgh, Norwich, Nottingham and London. In Edinburgh, only ten per cent of credit card users fail to repay the principal on their debt while in Norwich, home of the most diligent savers, nearly one third of the population saves more than two percent of their income monthly. In London, the percentage is only slightly less.

The worst savers are the credit cruisers that live in Glasgow, Liverpool, and Newcastle where as few as one in eight mages to save more than two per cent of their income monthly. In Cardiff, however, you will find savers and debtors, with it ranking high on the list of both credit cruisers and savers.

The report was based on 56,000 consumer records, and shows an increase in the polarisation of the economy as an entirety. According to Ian Hubbard of CDMS, there is a definitely sharp contrast in the usage of rolling credit card debt between the northern and southern parts of the UK. He further stated that the indicators should show economists and policymakers that further regeneration efforts are needed in areas that are distance from London's influence.

Banks Are “at Fault” for High Debt Levels

2007-06-01T12:24:00.000+01:00

The chairman of Britain's largest agency for debt relief programs has apparently waged an attack against the banks. Mike Blackburn of Debt Free Direct argues that the increase in the number of personal insolvencies filed by debtors in the UK are the fault of the banks, and that the insolvency industry has to clean up the mess lenders made.

He states that this is the direct result of excessive and irresponsible lending decisions that creditors made, thus ending up with debtors who have more debt than they can ever repay. While the banks have been squealing recently about their provisions, the debtors find that credit is being thrown their way.

In 2006, person insolvencies totalled 67,584, an increase of 45 per cent from 2005 figures. Debt Free Direct (DFD) estimates that there are one to two million people who are so heavily indebted that they will never be able to repay the principal on their loans.

It is estimated that the banks made £37 billion in profits last year and have been severely criticised for their irresponsible lending practices. However, instead of defending themselves or accepting responsibility, they are attempting to divert attention to those who provide individual voluntary arrangements (IVAs), a form of debt management that allows a debtor to avoid bankruptcy.

According to the banks' claims, these debt management companies are encouraging people to file IVAs when it isn't necessary. The number taken out in 2006 doubled to 45,000 while their value, which is a proportion of the banks' total impairment provisions, increased from 15 per cent to 30 per cent. HSBC was one of the first to raise questions about the issue after its half-year bad debt provisions increased to £361 million from the previous years' £265 million. It is possible that HSBC was embarrassed over the levels of provisioning and is likely still not happy with the current levels.

Mr. Blackburn also feels that if banks would share information about their customers' credit positions, the insolvency levels would decrease substantially. Unless banks develop the habit of sharing information, they will continue to provide favourable credit scores to heavily indebted customers, thus insolvencies will continue to rise.

Some IVA providers are being investigated because of aggressive advertising tactics, and though Mr. Blackburn agreed that there was a need for more regulation and behaviour training in the industry, he indicated that the real core of the issue is the amount of advertising that the creditors invoke.

Mr. Blackburn's comments are not likely to help improve relations between the debt management companies and the banks as they work to draw up a voluntary code of practice in the filing and management of IVAs. The banks seek to have fees more closely linked to the amount of debt that the debt management companies recover through an IVA instead of the fee that is currently charged upfront. While DFD claims it recovers about 42 pence on each pound, reports from the Insolvency Exchange estimate that only 65 to 70 per cent of IVAs continue to completion. That is an unfavourable comparison to trust deeds – IVA equivalents in Scotland – where approximately 95 per cent complete. That market is lead by Invocas.

IVAs – the New Face of Debt That Masks an Age-Old Truth

2007-05-30T10:20:00.000+01:00

The rise is astounding, the numbers phenomenal, and the popularity outrageous. Sadly, the star is not a new movie or stage play, but the individual voluntary arrangement(IVA). The intention of the program is to help people eliminate personal debts and has gained a high profile over the last few months because of its effect on tens of thousands of over indebted Britons.

Thus far the idea of entering into an IVA has remained a less popular alternative to bankruptcy. Instead of eliminating all debt except student loans, under the provisions of an IVA, applicants enlist the services of a debt relief company to pay back a portion of their entire debt to their creditors. This usually works out to be approximately 40 per cent of the balance owed. At the end of a three to five year period, any remaining debts are written off, but your credit record will be marred for six years.

Figures that were recently released by the Government's Insolvency Service showed that the gap between IVAs and bankruptcies is beginning to close. During the three-month period that ended in the end of September 2006, 12,228 IVAs were filed compared to 15,416 bankruptcies.

Added together, that is a total of 27,644 individual insolvencies – an increase of 55 per cent over the same period in 2005. While the figures themselves are alarming, the jump in IVAs is even more disturbing—during the same three months in 2005, there were only 5,611 IVAs recorded, which means an increase of 118 per cent since 2005. That compares to a moderate 27 per cent increase in bankruptcy filings.

As a result, banks have begun to wage their own war. In an attempt at backlash, banks – which pay the fees to these debt reduction agencies and the companies that manage the IVAs for consumers—are issuing warnings about the danger of unregulated advisors making excessive IVA recommendations.

Investors are definitely being attracted to the profitability of these kinds of companies. After all, Debt Free Direct reported an increase in turnover recently that amounted to 91 per cent, and Accuma reported a net profit of £19 million for its fiscal year compared to a previous loss of almost half a million pounds.
Consumer debt charities are beginning to shout louder as well. According to a report that Consumer Credit Counselling Service (CCCS) published recently, it recommends IVAs in only about 3 per cent of the cases of consumer debt that it evaluates. It voices concerns over the fact that IVAs are outnumber bankruptcies when its own statistics show that bankruptcies are more appropriate in many cases, than IVAs. It's important to note, however, that the CCCS will soon be setting up its own "not-for-profit" IVA entity, so it will likely report high take-up figures as well.
The question remains concerning who is really to blame for the rise in IVA filings. According to CCCS it's a combination of several things: TV advertising; lenders seeing consumers as nothing more than a body and thus their failure to enforce strict criteria when approving credit; relationship of lenders to the debt management companies.
It's easy to forget the individual among all the recriminations, but it's important to remember that each of us has a responsibility for our own actions. Today's financial mess is a reminder of that.

Number of Personal Insolvencies Declining

2007-05-28T13:37:00.000+01:00

According to accountancy firm, PricewaterhouseCoopers (PwC), the number of personal insolvencies is on the decline. PricewaterhouseCoopers reviews approximately half of all proposed IVAs for its clients that include banks, who are creditors of those contemplating IVAs.

According to the firm's own records, the number of new IVA filings has been declining over the past several months. An individual voluntary arrangement, or IVA, is an alternative to bankruptcy and wipes out part of the debts of an individual.

Pat Boyden who is one of PwC's insolvencies experts states that by all indications, IVA numbers have been falling gradually each month. The figures will more than likely be reflected in official statistics that will be filed later in the year.

In Mr. Boyden's opinion, the reason for the decrease in IVAs is related to a stabilisation of debt that follows a boom during the first five years of the 21stcentury.

In spite of the fact that personal loans rose again in 2006, the total balances outstand on credit cards decreased, and their use declined for the first time since their introduction to the UK in 1966.

Based on official statistics from the government's Insolvency Service, there was an increase of almost 60% in personal insolvencies in 2006, mostly because more people chose IVAs in order to obtain relief from some of their debts. Mr. Boyden feels that the high increase of 2006 is now tapering off as the number of new IVAs almost stopped during the last quarter of the year.

Another factor responsible for the fall in IVA numbers is that lenders are beginning to take a more hostile attitude toward IVA proposals that are presented to them on behalf of their customers. The agreements are voluntary, and a creditor is not obligated to accept the terms if he feels that person is capable of paying more of their debts than the debt relief company is suggesting. They are starting to become irritated with a minority of people who try to obtain relief through IVAs that they believe are capable of paying off more of their debts without such an arrangement.

According to government research, the typical IVA involves men in their 40s who have debts between £40,000 and £43,000. The IVA usually reduces that to about £24,000 with a five-year repayment plan. Of that amount, approximately one third of it goes to the IVA company, thus leaving the credit with only about £16,000.

With the new hard-nosed attitude that lenders have taken, some of the new IVA companies that have opened in the last few years have reported a downturn in business in recent months. In spite of that, Mr. Boyden warns that another increase in the number of people filing IVAs may be imminent in the future, especially if mortgage rates increase again.

Store Cards Must Post Warning

2007-05-24T12:12:00.000+01:00

Store cards have always been considered a forbidden fruit within the personal finance industry. Even though they are easy to obtain, convenient, and come with many built in discounts, they often leave some consumers with a feeling of being taken for a ride. Their annual percentage rates (APRs) that are often as high as 29.9 per cent can override any real savings if left unpaid for too long.

In spite of recent regulatory action that has forced store card providers that charge APRs of more than 25 per cent to inform customers that cheaper rates may be available elsewhere, other retailers have increased their rates. Holders of John Lewis store cards are one of the latest to face an increase in interest rates when the provider raised the APR from 15.5 to 16.9 recently. The rate for cash advances was increased to 18.9 per cent. John Lewis also owns Waitrose supermarkets as well as London's Peter Jones Department Store. He defends his position on the 1.4 percentage point hike in the APR, saying that it is due to the three rises in the base rate since August.

Industry experts are still critical even though John Lewis store cards are cheaper than some. They see the last round of APR increases serving as another blow to the consumers, according to Richard Brown of Moneynet.

While there are a few cards that offer favourable rates such as Ikea Home at 12.9 per cent, some of the larger high-street stores charge over five times the Bank of England's base rate of 5.25 per cent. For Example, Burton, Laura Ashley, Topshop, and Miss Selfridge all have an APR of 28 per cent, while the Toys R Us EasyBuy Edge card charges 29.9 per cent at the time this article was written.

Mr. Brown goes on to state that store cards have prohibitively expensive terms, and though they may be convenient, shoppers should never use them to carry debt from one month to another.

Smart shoppers who are aware of the high rates stores charge on these cards don't use them for borrowing. Instead, they sign up in order to take advantage of the discounts and immediately pay their debt in full. After that, consumers should either cut the cards in half or put them away unused in case other discount offers become available in the future.

Mr. Brown recommends an arranged overdraft or using one of the cheap 0 per cent introductory-rate credit cards for borrowing money. Other consumer agencies have stated that the cards are often an unnecessary and a prohibitively expensive way to borrow, thus advises consumers to avoid using them.

Alerts for Store Credit Card Customers

2007-05-22T10:54:00.000+01:00

UK shoppers who use store credit cards with an Annual Percentage Rate (APR) of more than 25% will find alerts on their account statements advising them that they can get a better deal someplace else. About two thirds of store credit cards that are offered in the United Kingdom fall into this above 25 per cent category in order to generate a warning.

The move to provide consumers with the warning follows an inquiry last year by the Competition Commission, which found APRs on store credit cards were excessive. Calculations by the Commission estimated that store card users have been overcharged a minimum of £55 million annually. Store credit card accounts in the United Kingdom total approximately eleven million.

The Finance and Leasing Association (FLA) represents providers of store credit cards and stated that the industry was prepared for the change that was inspired by the Competition Commission. According to a spokesman for the FLA, some providers have already started to lower their rates. Providers are moving forward and implementing the Competition Commission requests, including the requested information on statements.

Research conducted by Moneyfacts indicates that approximately two-thirds of store cards in the UK charge APRs between 25 and 29.9 percent. In the future, these card providers will be required to incorporate warnings on their statements. The Competition Commission recommendations to providers of the store cards requesting that they consider 25 percent as a high interest rate has been ignored by the biggest majority of providers according to a Moneyfacts spokesman.

Overspending Causes Financial Trouble for Brits

2007-05-18T14:21:00.000+01:00

Most people in the United Kingdom admit that they overspend on a regular basis, which puts them at risk of finding themselves having grave financial difficulty and excessive debt. Information compiled by Credit Expert state that eight per cent of UK consumers admit that they sometimes spend more than they had planned. This leads many consumers to look to avenues of relief such as bankruptcy and IVAs (Individual Voluntary Arrangements). In fact, the figures collected by Credit Expert show that five per cent of the population has thought about taking out an IVA or declaring bankruptcy. Another nine per cent admit they have taken out a new credit card in order to clear debt on an existing one.

The research seems to indicate that UK consumers have a serious lack of understanding about the long-term consequences of their actions and how such poor financial decisions can affect their credit rating according to Jim Hodgkins, the managing director of CreditExperts.co.uk. He further states that people must begin to fully understand the implications of their financial mismanagement.

Figures recently submitted by the Insolvency Service show an increase in the number of IVAs in the first quarter of 2007. Compared to figures from the first three months of 2006, 47.6 per cent more IVAs were approved over the same period in 2006.

Financial Errors that Create Debt

2007-05-17T10:10:00.000+01:00

Millions of UK consumers are creating financial problems that are avoidable. Research conducted by credit reporting agency, CreditExpert indicates that one in ten adults has considered insolvency either in the form of bankruptcy or an Individual Voluntary Arrangement (IVA) to help clear their mounting debts. According to the company's research, many of those had made basic financial errors that added to their initial problems of overspending.

As an example, ten per cent of those surveyed admitted that they took out a new credit to pay off an existing one, and another one in ten had missed payments on credit cards, store cards, or mortgages. Another common financial error was taking out a long-term, high interest consolidation loan in order to pay off existing debts.

Credit Awareness Week is designed with the sole purpose of encouraging consumers to gain better control of their financial affairs. When it began, the company said that twenty-five percent of Brits admitted to having difficulty with personal financial control.

According to recent government statistics, personal insolvencies reached 30,075 during the quarter that ended March 31st, an increase of 24 per cent over the same period last year. The figure included 6,842 bankruptcies, a ten per cent increase from last year, and 13,233 IVAs, a 48 per cent increase over the same period in 2006. They expect the recent rise in interest rate to cause more people to experience debt problems.

CreditExpert's managing director, Jim Hodgkins, finds it disturbing that so many people admit to making basic financial mistakes that cause them to consider turning to quick fix solutions such as taking out an IVA. He further states that their research is indicative of consumers having a lack of understanding regarding any long-term consequences of their actions and how those decisions can affect their credit rating – a factor that will impact their entire financial future.

Research also showed that eighty percent of adults admitted to overspending during times of stress, after arguments with partners, or simply feeling overwhelmed with their responsibility as the primary breadwinner.

Bank Profits Rise in Spite of Bad Debts

2007-05-10T10:13:00.000+01:00

In spite of an increase in the cost of unpaid loans by consumers trying to escape from their increasing debt loads, projections are that Britain’s banks will report profits of more than £40 billion. The announcement is expected to come with reports soon to be released.

Early projections are that HSBC, Britain’s largest bank and the third largest in the world may exceed last year’s record of £20.9 billion in profit in spite of problems within its United States division that is causing analysts to consider decreasing as much as 10% off their forecasts.

It is probable that Barclays will make profits of more than £7 billion even though it has been hit hard by the failure of customers to make credit card payments. There is a possibility that the country’s third largest bank is looking at the possibility of reducing losses from riskier loans, and recently reported that it may sell its Monument operation, which targets those customers with lower incomes.

Banks reported a combined profit of £20 billion for the first half of 2006, which set the scene for their record tally of profits. The profits were in spite of them absorbing charges in excess of £2.5 billion as they covered the cost of customers who were struggling to repay loans.

Although bad debts will continue to be watched closely, it is believed that the end of “free” banking is very close at hand. With intervention by the competitive authorities into various areas that range from credit cards to payment protection, and most recently, the voluntary banking code itself, early forecasts are that banks will soon charge for even the basic bank services. First Direct, HSBC’s phone bank, is beginning to charge for some services and others may follow later according to some sources.

The amount of bad debts is of the greatest concern for investors. Lloyds TSB and Barclays have felt the most pain in these areas, with Lloyds being the country’s largest unsecured lender. In spite of their concerns, reports issued before the reporting season closed are indicative of a trend toward stabilization. Forecasters will be watching for any new information that shows the impact of individual voluntary arrangements(IVAs) on bad debts. Analysts at Merrill Lynch believe the numbers are going to go up but then stabilize, but at the present time, there is no indication of the beginning of that trend.

Banking experts believe that most of the rapid growth in profits will come from outside of the United Kingdom. This will be shown as an increase in pedestrian growth in comparison to an increased expansion in the areas of investment banking, corporate markets, and investment management.

Some banks are even being scrutinized about their strategies concerning acquisitions and disposals. Some analysts question whether Barclays is considering a deal in the United States after it took out a £400 million sponsorship deal. There is also speculation that Standard Chartered may be planning some acquisitions.
All of the banks are facing scrutiny over their operations as more face an increase in bad debts while still increasing profits. Of course, it standards to reason that banks, like any other business, are there to make a profit, and if it means raising costs to customers in order to offset an increase in bad debt write-offs, then that is what they will be. It isn’t much different than a department store raising the price of its goods in order to offset the cost of shoplifting incidents, but consumers are just more likely to feel directly affected by an increase in bank fees, especially interest rates and credit card annual fees. After all, consumers are more likely to give up credit cards than shopping in their favorite store, no matter what the cost may be.

It’s too early to determine what the increase in bank fees may mean for the consumer, but if you base it on past performance, it’s safe to assume that business will decline at first as consumers complain about an increase in fees but will stabilize as they realize there is little they can do but accept the inevitable.

Financial Behavior Mirrors That of Soap Operas

2007-05-04T10:21:00.000+01:00

Life in Britain mirrors that of art. This is especially true when it pertains to financial behavior as compared to some favorite soap characters. This information is based on a CreditTV report published by CreditExpert.co.uk.
The lifestyles and financial behaviors of some of the United Kingdom's leading soap opera characters were analyzed for this report and a comparison was made to those of the nation as a whole. Experian's consumer augmentation program, Mosaic UK, was used to compile and analyze the information that was used in the report.
The report revealed that Brits identify with the EastEnders' Pat Butcher the most, but sixteen per cent share similar behaviors to that of the Queen Vic regular on the show. The study reinforces reports of current trends of increased debt loads and overspending. Of those who have similar characteristics to the star on EastEnders, thirty-two percent are unable to set aside any money to save or invest while thirty-four per cent who have credit agreements face a consistent struggle to make their monthly payments.
The report also reveals the following:
• Only about ten per cent of Brits are as financially educated as Ian Beale of EastEnders and Rodney Blackstock of Emmerdale.
• Those who identify with Rodney Blackstock tend to have good financial habits with sixty-four per cent reporting that they are able to make their repayments on credit agreements with ease with another twenty-seven per cent reporting an income surplus after making monthly payments.
• Fifty-three per cent in Ian Beale's group report the ability to save money and invest at the end of every month. In addition, forty-two per cent know their credit rating compared to only thirty-three per cent in Pat Butcher's group.
HOW THE FINANCIAL SOAP STARS COMPARE
1. Pat Butcher (EastEnders) – 16 per cent

A bookie owner with good intentions, but like the sixteen per cent of Brits who identify with her, she lacks financial control and consistently struggles to make her monthly credit repayments. Ten per cent of those who exhibit her traits report they are poor in handling their money and frequently spend money frivolously.

2. Rosemary King (Emmerdale) 15 per cent

Those Brits who identify with widow Rosemary King are financially comfortable with both time and money on their hands. They are very cautious people, and sixty-one percent state they have control over their money management. This group is more likely to have a small amount of savings rather than a variety of different savings accounts and investments.

3. Ian Beale (EastEnders) 10 per cent

Only ten per cent of Brits display the traits of this Kath's café boss who exhibits traits such as making monthly credit payments with no problems (46 per cent) and having some kind of savings and investments (53 per cent). Also in this group, fifty-one per cent consider themselves good money managers and feel they are in control of their personal finances. Forty-four per cent admit they sometimes slip in controlling their personal finances, but the way Beale bounced back from bankruptcy in 2000 proves this group is good with regaining financial stability.

4. Rodney Blackstock (Emmerdale) Seven per cent

The Brits who identify with Blackstock and his financial successes are likely to be financially success with rewarding and challenging careers. Eighty six per cent in this group are educated concerning investment and have both savings and investments. In addition, forty-five per cent conduct research before making a decision about buying financial policies.

5. Liam Connor (Coronation Street) Seven percent

Most of the people who identify with this Underworld boss of the street are confident when it comes to cash with seventy-three per cent reporting that they can make repayments on loans easily or have cash left over after financial obligations are met. On the other end of the sphere, sixty-three per cent of people in this group admit that they have no idea what their personal credit rating is.

6. Cilla Battersby-Brown (Coronation Street) Six per cent

Cilla is typical of six per cent of the nation who are not financially secure and struggle just to make ends meet. Forty-nine per cent don't have the income level to save or invest, while thirty-three per cent seek additional financial help by taken out a personal loan.

According to Jim Hodgkins, Managing Director of CreditExpert.co.uk, their study highlights the range of attitudes and situations that exist in the UK currently in spite of the fact that they study used fictional characters. He also states that no matter what your financial status may be, it's important to know what your credit rating is, something that many of the Brits that were surveyed had no knowledge. In fact, they had no idea of their credit score or how it could affect their future borrowing power. Regularly monitoring your credit report can provide assistance in managing your finances as well as identifying any instances of fraud early. Credit monitoring services such as CreditExpert.co.uk can notify you of any changes in your credit report in the event that any fraudulent activity occurs. Early detection is the key to preventing a substantial loss in cases of fraud of identity theft.

Increase in IVAs Is Projected

2007-05-02T09:56:00.000+01:00

With the entry of new legislation that goes into effect, the demand for individual voluntary arrangements(IVAs) is expected to increase according to the Money, Debt and Credit Group, a company that helps debtors reduce their debt. With sales of £1.04 million in the 64 weeks preceding December 31st, it closed with a pre tax loss of £2.83 million. Though no comparative figures were available, the company stated that it expects to see profits beginning in 2008.

The company stated that it has seen a substantial increase in IVAs, which are a form of debt management that allow debtors to avoid bankruptcy. In 2006, 561 cases were approved, and at the present time, 1,257 cases are currently in progress. With United Kingdom consumer debt now at £1.3 trillion, the company feels that the IVA market will continue to grow. Between 2005 and 2006, the number of IVAs that were registered increased from 20,292 to 44,331.

One third of all unsecured debt in Western Europe is borne by people in the United Kingdom with the average UK consumer owing over two times as much as the average consumer in all of Western Europe according to research that was conducted by Datamonitor. Because of this, Money, Debt and Credit feels that personal insolvency solutions provide companies who work with debtors an ideal opportunity for growth.

Another factor that is likely to have an effect on the number of IVAs is new legislation that will take effect over the next year. Currently IVAs must be approved by seventy five percent of creditors for debts under £75,000, but new legislation will allow it to be approved by a majority of creditors instead of the current seventy five per cent. The company feels that this new legislation will increase the demand for their services and acceptances for IVAs, thus providing an increase in revenue.

Choosing Between Bankruptcy and an IVA

2007-04-23T10:20:00.000+01:00

A substantial number of people in the United Kingdom became insolvent in 2006 as they struggled to remain afloat under the weight of the £1.3 trillion in debt that UK consumers faced. Based upon reports by the Insolvency Service, 63,000 filed bankruptcy while 44,000 chose Individual Voluntary Arrangements(IVAs). IVAs have seen a higher level of grown than bankruptcy, perhaps because people many people do not want to suffer the social stigma of filing bankruptcy even though many times this may be the best option. A spokesperson for Consumer Credit Counseling Services warned that both IVAs and bankruptcy should only be used as last resorts, but you should choose the correct path when you are forced into insolvency.

What path you choose depends upon your personal circumstances. IVAs are the best solution for those who have a regular income, debts over £15,000, a major asset they wish to protect from seizure, a high level job, and enough discipline to follow through with the contract. The typical IVA client is a young professional with a good job that has simply gotten himself or herself in too much debt.

An IVA is a formal agreement sanctioned by the court between debtor and creditor. In return for a portion of the debt being removed at the end of the IVA period (between three and five years), the debtor promises to pay a set monthly payment. If the IVA contract fails, the debt returns to the original amount regardless of how much has been repaid, which will likely force the debtor into bankruptcy anyway.

In order for an IVA to work, the debtor must be able to afford to pay at least £200 per month on their debts, and if they are going to struggle in order to raise that amount throughout the term of the contract, they should look at options other than an IVA. That is the reason that most people who choose IVAs are employed in positions that pay higher salaries.

Homeowners are more likely to choose IVAs than renters. The benefit of this is that your home is largely protected from any seizure by credits, and you also have some influence over how other assets, such as cars, are treated. A creditor cannot force a debtor to sell their home in order to satisfy debts, but at the closure of the IVA contract, they can force them to revalue the property. If the property has risen in value, they do have a right to ask the debtor to release the equity in order to make a final payment on the outstanding debt. If a debtor is driving an expensive car, a credit can also ask them to sell it and buy a cheaper model, using the difference to pay creditors.

Most professionals who find themselves too deeply into debt usually choose IVAs over bankruptcy because choosing bankruptcy means that they must obtain permission from the court to become involved in the promotion, formation, or management of a company. Their professional accreditation will also suffer if they work in financial careers such as accounting.

At the end of an IVA contract, the amount that is written off can be up to 75 percent; however, lenders are tightening the reins on the number of IVAs the approve as well as how much of the debt they are willing to write off. In the past, HSBC used to accept IVAs that gave them twenty-five pence on every £1, but they have now raised the minimum to forty pence per £1 of loan value.

Insolvency practitioners arrange IVAs, which can have start up costs that run into the thousands. The insolvency companies claim that the consumers do not bear the cost of these expenses, but the harsh reality is that during the first year of the contract, all repayments go to the insolvency practitioner.

Keep in mind there are some good and bad points to filing an IVA.

Pros

• You do not have to sell major assets such as your house
• You are not restricted from any employment
• Between one half and two thirds of the debt may be written off at the end of the contract

Cons

• The process is long and brittle. If the program fails, you are right back where you were on day one.
• If the value of your property increases during the contract, credits can make further claims.

Equity Loans on the Increase in the United Kingdom

2007-04-19T10:19:00.000+01:00

Recent data from the Bank of England shows that more homeowners in the United Kingdom are increasing their debts by borrowing against the equity in their homes. According to analysts, this is primarily because of a lack of growth in disposable income during 2006 as well as consumers wishing to borrow money at a lower interest rate than they are paying on credit cards.

According to reports issued by the Bank of England, homeowners borrowed £14.6 billion against their homes' equity during the fourth quarter of 2006 compared to £12.2 billion in the third quarter. Equity loans for all of 2006 totalled £49.7 billion, which was a substantial increase from the £36.6 billion that homeowners borrowed in 2005.

Analysts state that the equity loans were used for several purposes including consumer spending, and to pay off credit card debt, pay off personal loans, make investments, and make payments to pension funds. In the event that house prices fall, this debt exposure could create a problem, but that is not something that is expected to happen any time in the near future. Expectations are that a supply shortage will support prices for houses provided that the demand remains high.

Divorce Causes Problems Following Debt Consolidation Loans

2007-04-16T08:39:00.000+01:00

It's important for couples that have jointly sought debt relief to inform any relevant agencies as soon as possible in the event that they split up. Part of the problem lies in the fact that many times debt consolidation loans are made in the name of only one of the parties, and when the relationship ends, that individual is left with the responsibility of repaying the whole debt. This can cause serious problems because with most families today having two incomes, a divorce means a dramatic decrease in income for each half of the couple.

Couples who are involved in a divorce must make certain that they notify both the creditors and the reporting agencies in order to allow future creditors to see why debt issues occurred so that they can take that in consideration when determining the credit stability of each half of the former couple.

It is statistically proven that financial difficulties are one of the major contributing factors to relationships failing, so in the case of a consolidation loan with a divorce later, you see financial problems breaking up the relationship and then kicking you when you're down later. For this reason it is essential that credit reporting agencies are aware of any factors that may potentially affect a person's financial situation because these things can have a detrimental effect on the individual's future ability to obtain debt relief or secured loans.