Debt Assistant

Accountants KPMG say that £1.4bn of debt has been written off by creditors in 2006 due to the increase in use of Individual Voluntary Arrangements (IVA). Approximately 110,000 people became insolvent this year, the first time the figure has been above 100,000. The average person taking out an IVA owed £52,000 and had agreed to pay 39% of their debt.

This is a frightening figure that can only get worse as interest rates increase, as they are expected to do in the New Year. IVAs put creditors in a tricky situation: they at least receive some of the money owed, unlike if they forced bankruptcy, but there is only so much bad debt they will be willing to write off. The only outcome I can see is that they will tighten their lending criteria, making credit harder to get.