Families Opting For IVA's To Get Out Of Debt

Increasingl, younger families living in terraces in the M4 corridor are more likely to file for individual voluntary arrangements(IVAs) – an alternative to bankruptcy than the rest of the population, according to research out today.

The report, from credit-reference firm Experian, revealed that IVAs are fast becoming an acceptable lifestyle option for young families struggling with their debts.

The research found that people in a group called ‘happy families’ are 60 per cent more likely to be tempted by an IVA.

They tend to live in mid-market terraces or semi-detached houses in council tax band B – properties worth between £126,000 and £150,000. The M4 corridor is a particular hotspot, according to Experian.

The ‘happy families’ group is broken down further into ‘fledgling nurseries’ – those with young children – and ‘middle rung families’ – those who are climbing the corporate ladder. Both groups are twice as likely to opt for an IVA rather than bankruptcy because they think no one will find out.

IVAs were introduced in 1986 to help entrepreneurs avoid the stigma of bankruptcy. Banks and creditors agree to ‘forgive a portion of you debt – up to 75 per cent – and you repay the rest over five years. You are not formally bankrupted and do no lose your home or your job if you keep up repayments.

Richard Fiddis of Experian said: "Since the introduction of IVAs, the stigma of bankruptcy amongst the general population has greatly diminished. In some respects, this is a good thing because it encourages risk taking and entrepreneurs. However, insolvency is now increasingly being seen as an easy way out of debt, particularly among the young, who often do not consider the longer-term consequences – or are misled into believing there are none."

Experian said an IVA would appear on your credit report for six years.

The Times
October 16th, 2006

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