r squeezed by the more established companies with deeper marketing pockets.

For the consumer with major debt problems and no assets, there are only three methods of debt consolidation to be considered. An IVA; a personal bankruptcy or a Pro Rata (often called a Debt Management Plan). In the event that an IVA is rejected by creditors then most debtors would probably be financially better off applying for a personal bankruptcy. Under the most recent bankruptcy legislation a debtor would only be usually liable to make contributions for up to three years - and in many cases probably just for a year – whereas

The first quarter of 2007 has seen dramatic changes in the IVA marketplace both for company’s offering the IVA solution, and for people with debt problems seeking to use an IVA to sort out overwhelming debt issues.

The latest available IVA statistics (Quarter 4 2006) show that the overall levels of insolvency are still rising but with a slightly higher proportion of debtors now opting for bankruptcy as opposed to IVA, when compared to the statistics for Quarter 3 2006. One of the main reasons behind the statistical change is that the banks and financial institutions are becoming more aggressive in their treatment of IVA applications and are rejecting IVA proposals in more and more cases. The banks have seen their bad debt provisions continue to rise over the last few years, and appear to have decided that a principal reason for the debt increase is IVA companies “touting” for debtors to enter into IVAs. The banks hardening attitude towards IVA proposals means that IVA companies now have to fight much harder – and spend significantly more marketing money – in trying to retain or expand their own IVA market share. The evidence of this vastly increased IVA marketing spend is easily seen in the national press and TV.

Additionally, the levels of fee which an IVA company can charge are also coming under increasing creditor pressure. The creditors often want a greater percentage of the debtors’ available IVA contributions in return for a “yes” vote. As the overall IVA pot is reasonably fixed there is no real way for the IVA companies to increase their total fees. There is every reason to believe that this downward pressure on IVA fees will continue and margins will get tighter for everyone. The IVA companies may be able to cut their costs, or diversify into related financial services, to alleviate the lower IVA margins, but the overall financial returns are likely to suffer.

A third major problem which IVA companies need to recognise is that there are no real barriers to new companies coming into the market and offering the IVA solution. There are now in excess of 500 different companies offering an IVA solution and costs for all companies will continue to rise as a consequence. Many smaller finance brokers and Independent Financial Advisors (IFA) are now offering introductions to an IVA solution which was not apparent two years ago. Many smaller IVA introducers may well fall by the wayside as their profits get further squeezed by the more established companies with deeper marketing pockets.

For the consumer with major debt problems and no assets, there are only three methods of debt consolidation to be considered. An IVA; a personal bankruptcy or a Pro Rata (often called a Debt Management Plan). In the event that an IVA is rejected by creditors then most debtors would probably be financially better off applying for a personal bankruptcy. Under the most recent bankruptcy legislation a debtor would only be usually liable to make contributions for up to three years - and in many cases probably just for a year – whereas

reatment of IVA applications and are rejecting IVA proposals in more and more cases. The banks have seen their bad debt provisions continue to rise over the last few years, and appear to have decided that a principal reason for the debt increase is IVA companies “touting” for debtors to enter into IVAs. The banks hardening attitude towards IVA proposals means that IVA companies now have to fight much harder – and spend significantly more marketing money – in trying to retain or expand their own IVA market share. The evidence of this vastly increased IVA marketing spend is easily seen in the national press and TV.

Additionally, the levels of fee which an IVA company can charge are also coming under increasing creditor pressure. The creditors often want a greater percentage of the debtors’ available IVA contributions in return for a “yes” vote. As the overall IVA pot is reasonably fixed there is no real way for the IVA companies to increase their total fees. There is every reason to believe that this downward pressure on IVA fees will continue and margins will get tighter for everyone. The IVA companies may be able to cut their costs, or diversify into related financial services, to alleviate the lower IVA margins, but the overall financial returns are likely to suffer.

A third major problem which IVA companies need to recognise is that there are no real barriers to new companies coming into the market and offering the IVA solution. There are now in excess of 500 different companies offering an IVA solution and costs for all companies will continue to rise as a consequence. Many smaller finance brokers and Independent Financial Advisors (IFA) are now offering introductions to an IVA solution which was not apparent two years ago. Many smaller IVA introducers may well fall by the wayside as their profits get further squeezed by the more established companies with deeper marketing pockets.

For the consumer with major debt problems and no assets, there are only three methods of debt consolidation to be considered. An IVA; a personal bankruptcy or a Pro Rata (often called a Debt Management Plan). In the event that an IVA is rejected by creditors then most debtors would probably be financially better off applying for a personal bankruptcy. Under the most recent bankruptcy legislation a debtor would only be usually liable to make contributions for up to three years - and in many cases probably just for a year – whereas

V.

Additionally, the levels of fee which an IVA company can charge are also coming under increasing creditor pressure. The creditors often want a greater percentage of the debtors’ available IVA contributions in return for a “yes” vote. As the overall IVA pot is reasonably fixed there is no real way for the IVA companies to increase their total fees. There is every reason to believe that this downward pressure on IVA fees will continue and margins will get tighter for everyone. The IVA companies may be able to cut their costs, or diversify into related financial services, to alleviate the lower IVA margins, but the overall financial returns are likely to suffer.

A third major problem which IVA companies need to recognise is that there are no real barriers to new companies coming into the market and offering the IVA solution. There are now in excess of 500 different companies offering an IVA solution and costs for all companies will continue to rise as a consequence. Many smaller finance brokers and Independent Financial Advisors (IFA) are now offering introductions to an IVA solution which was not apparent two years ago. Many smaller IVA introducers may well fall by the wayside as their profits get further squeezed by the more established companies with deeper marketing pockets.

For the consumer with major debt problems and no assets, there are only three methods of debt consolidation to be considered. An IVA; a personal bankruptcy or a Pro Rata (often called a Debt Management Plan). In the event that an IVA is rejected by creditors then most debtors would probably be financially better off applying for a personal bankruptcy. Under the most recent bankruptcy legislation a debtor would only be usually liable to make contributions for up to three years - and in many cases probably just for a year – whereas

s, but the overall financial returns are likely to suffer.

A third major problem which IVA companies need to recognise is that there are no real barriers to new companies coming into the market and offering the IVA solution. There are now in excess of 500 different companies offering an IVA solution and costs for all companies will continue to rise as a consequence. Many smaller finance brokers and Independent Financial Advisors (IFA) are now offering introductions to an IVA solution which was not apparent two years ago. Many smaller IVA introducers may well fall by the wayside as their profits get further squeezed by the more established companies with deeper marketing pockets.

For the consumer with major debt problems and no assets, there are only three methods of debt consolidation to be considered. An IVA; a personal bankruptcy or a Pro Rata (often called a Debt Management Plan). In the event that an IVA is rejected by creditors then most debtors would probably be financially better off applying for a personal bankruptcy. Under the most recent bankruptcy legislation a debtor would only be usually liable to make contributions for up to three years - and in many cases probably just for a year – whereas

r squeezed by the more established companies with deeper marketing pockets.

For the consumer with major debt problems and no assets, there are only three methods of debt consolidation to be considered. An IVA; a personal bankruptcy or a Pro Rata (often called a Debt Management Plan). In the event that an IVA is rejected by creditors then most debtors would probably be financially better off applying for a personal bankruptcy. Under the most recent bankruptcy legislation a debtor would only be usually liable to make contributions for up to three years - and in many cases probably just for a year – whereas under a Pro Rata the debtor would continue to make contributions until the whole of the debts were cleared, often many many years into the future. Those banks and credit card companies now being far harsher with IVAs seem to be relying on the assumption that most debtors so rejected will not apply for personal bankruptcy, because the banks will get virtually nothing if the debtor goes bankrupt. It does seem very strange, if not a little financially perverse, that the banks will reject an IVA proposal knowing full well that they will be far worse off if the debtor then applies for bankruptcy.

There is a great deal of uncertainty at the moment in the IVA marketplace. The standoff between the creditors and IVA companies appears set to continue. Even though the Office of Fair Trading has recently issued advertising guidelines and warnings to some IVA companies concerning promotion of IVAs; and the British Banking Association is trying to find common ground on behalf of the creditors, there will always remain debtors with debt problems trying desperately to sort out their affairs.