My Way Out Of A Debt Nightmare

When the precipice loomed, she went over it at high speed. Already £80,000 in debt and having just set up in business, Deborah Taylor's bank bombarded her with loan offers.

She finally succumbed and applied for £24,000. Deborah, 43, vanished into the financial abyss, eventually running up debts of £134,000. 'It was a horrendous experience,' the web designer said. 'I felt as if I was in a bubble, screaming, and no one could hear me. I ended up on anti-depressants.'

Her way out was an individual voluntary arrangement - a type of insolvency in which borrowers pay part of their debts in return for having the rest written off and avoiding the stigma of bankruptcy. And thanks to Britain's credit binge, it is a booming business - 11,105 people went into an IVA in the past three months alone.

Deborah, from Portsmouth, says her IVA is a boon. She has repaid just under 20% of her debts to her bank and though she is having to sell her house, she is still relieved. 'I feel like a different person,' she said.

Going bust has long been seen as the preserve of entrepreneurs. Famous bankrupts include TV chef Keith Floyd. But massive debt is no longer just for wheeler-dealers and is becoming more and more common among ordinary shoppers who have overspent.

High Street banks last week wrote off billions in bad debts, with £2.6bn attributable directly to consumers. The banks claimed the rise was fuelled by easy bankruptcy laws and the boom in IVAs.

The number of IVAs could rise still faster under plans to introduce Simple IVAs - or SIVAs - within the next 18 months. At present, debtors must get agreement from 75% of their lenders to enter an IVA. An SIVA will reduce that to 50%, but only if debts total less than £75,000.

Patrick Boyden, personal insolvency partner at PricewaterhouseCoopers, said: 'SIVAs will mean more business for the 'IVA factories' - as I call them - and draw more people from the poorer end of the market into using IVAs.'

Many blame the rising number of bad debts on the banks for overlending. Paul Latham, finance director at insolvency advice group Debt Free Direct, said banks could not place the responsibility for growing bad debts on organisations such as the one he represents.

'The banks spend £300m advertising lending every year,' he said. 'Blaming us for bad debts is like cigarette companies blaming doctors for diagnosing lung cancer.'

Finbarr O'Connell, president of the Insolvency Practitioners Association, claimed the rise in the use of IVAs was actually good news for the banks.

'I think it is very much to be welcomed that consumer debtors are increasingly looking to use what has become a well-established route to reaching some sort of orderly settlement with their creditors, rather than simply throwing in their hand and going bankrupt,' he said.

Even so, there are fears of a looming scandal in insolvency advice. Financial Mail and This is Money reported in April on fears that people were being advised to enter into an IVA when in their own interests they would be better off going bankrupt.

An insolvency business earns no fees from recommending bankruptcy, but can earn up to £6,000 by arranging an IVA.

Perhaps surprisingly, Latham said: 'Like the pension business 20 years ago, there are people in our industry who are not giving the best advice, either for the debtor or the lender.

'Some advisers charge the debtor upfront to arrange an IVA, which is not refunded if no IVA is agreed. That should be banned.' At present, each insolvency practitioner is regulated individually by professional bodies such as the Law Society.

Daily Mail

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