New data exposes a record-breaking surge in the count of individuals burdened by overwhelming debts, who have opted for contentious official arrangements to settle their dues.
In 2021, the total number of registered Individual Voluntary Arrangements (IVAs) in England and Wales reached a staggering 81,199, surpassing the figure from 2015 by more than double, as disclosed by the Insolvency Service.
The data has raised concerns that private debt management firms are enticing vulnerable individuals into inappropriate legally binding arrangements, placing them at risk.
Individual Voluntary Arrangements (IVAs) are approved by the court and typically span five to six years. They entail a monthly repayment amount agreed upon by the creditor and are supervised by a dedicated advisor. They are considered an alternative to bankruptcy for individuals with assets to safeguard and adequate surplus income to meet the monthly obligation.
However, allegations suggest that these plans are frequently misrepresented and advertised as a simple solution by companies that profit significantly from commissions and fees, despite the existence of more appropriate alternatives.
In the previous year, the Financial Conduct Authority (FCA) declared that the market was “flawed,” as charitable organizations and free debt advisory services were being overshadowed by firms earning commissions of up to £1,000 for each individual they direct to insolvency practitioners.
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