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Individual Voluntary Arrangement

Debts, Financial, Financial Management, Financial Services, Money, Personal Finance

IVAs: Help Avoiding Repossession

Responding to the latest figures from the CML (Council of Mortgage Lenders), debt management company Gregory Pennington has stressed the role which debt solutions addressing unsecured debt can play in helping people avoid repossession.

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Released on May 15th, the CML’s figures show that 12,800 repossessions were carried out by first-charge mortgage lenders in the first quarter of 2009. “Compared with many predictions, these figures are relatively low,” said a spokesperson for Gregory Pennington. “Indeed, the CML itself has used the word ‘pessimistic’ in reference to its own estimate of 75,000 repossessions throughout 2009, and has recently revised this figure downwards to 65,000.

“It’s good to see lenders and borrowers working together to keep the figure as low as possible, but it’s important not to become complacent. There were still around 23% more repossessions in Q1 2009 than in the previous quarter – and 50% more than we saw in Q1 last year.

“Looking ahead, the repossession figures for the rest of 2009 are by no means set in stone. They depend not just on the state of the economy and the forbearance shown by secured lenders, but on the attitude of borrowers and unsecured lenders alike.

“In this recession, many people are suffering multiple ‘shocks’ at the same time. With 2.2 million unemployed and many others dealing with reduced wages, homeowners are also facing the issue of falling equity. While there’s no direct link between low (or negative) equity and repossession, this is limiting many homeowners’ ability to access ways of dealing with their debt – from debt consolidation loans and remortgaging to downsizing to a smaller property.

“It all underlines the importance of finding a solution that addresses a borrower’s priority and non-priority commitments at the same time. A founder member of DEMSA (the Debt Managers Standards Association), Gregory Pennington has 15 years’ experience of dealing with lenders of all kinds.

“Secured and unsecured lenders alike clearly have a thorough understanding of the problems consumers face today. They understand the link between secured and unsecured debt problems.

“Secured lenders know that many of today’s borrowers are facing complex financial problems, trying to deal with unsecured debts as well as secured.

“Unsecured lenders, in general, appreciate that a homeowner’s secured debts must take priority – and that repossession is unlikely to improve the borrower’s chances of repaying their unsecured debt.

“This is one reason unsecured lenders will often agree to the terms of an IVA (Individual Voluntary Arrangement).”

A solution that’s designed to address the concerns of everyone involved, an IVA can help unsecured lenders recover as much of their money as realistically possible, and can help borrowers avoid the need to focus on their mortgage / rent at the expense of their unsecured debts. Insolvency Practitioners (IPs) achieve this by calculating how much the individual can realistically afford to repay per month after they’ve taken their mortgage / rent payments and other essential expenses into account.

“Even so, we always emphasise that entering an IVA is a serious step, and is by no means suitable for everyone facing debt problems. Depending on their situation, different homeowners may be better advised to consider alternative solutions to their debt problems.”

Via EPR Network
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Debt Advisers Direct remind consumers with debt problems of the importance of seeking debt advice early on, before their finances are further affected by the recession

Commenting on the nation’s economic troubles, Debt Advisers Direct stressed the importance of seeking debt advice in time, before debt problems can escalate out of control.

“Whatever the economic climate, it always makes sense to address debts at the first sign of trouble,” said a spokesperson for the company. “During times of economic uncertainty, it’s more important than ever.

“The problems in the housing market alone pose a significant threat to the livelihoods of people in all walks of life. What was initially seen as an issue for estate agents has grown to affect builders, movers, decorators, furniture stores and so on – after months of negative news from companies directly linked to the housing market, we’re now hearing of problems in a much wider range of industries.

“With so many either out of work or facing the possibility of unemployment, people are spending less and problems in the housing industry are spilling over into the high street, placing even more jobs at risk – at a time when new employment may be hard to find.

“Coping with a period of reduced income is never easy, but people with high levels of debt are far more likely to experience financial problems almost as soon as their income drops.

“This underlines the need to tackle debt problems sooner, rather than later. Many people with smaller debt problems may find a chat with a debt adviser could help them get on top of their finances without making any major lifestyle changes. Once the adviser understands their financial circumstances, they should be able to provide some budgeting advice and suggest practical ways of reducing their level of debt.

“When it comes to more serious financial problems, however, many people are put off by the sheer size of their debts. Someone who owes tens of thousands of pounds may not feel there’s anything they can do to make an appreciable ‘dent’ in their debts.”

In most cases this is unlikely to be true: “However much they owe, they may still have a range of options, depending on their circumstances. A debt consolidation mortgage, for example, could be right for someone who wants to reduce their monthly outgoings and simplify their finances, while an IVA (Individual Voluntary Arrangement) could help someone who literally can’t keep up with their debt repayments – and who can’t realistically expect to repay their debts in a reasonable timeframe.

“We were very pleased to see the emphasis which the Chancellor’s Pre-Budget Report placed on debt advice – the Government is dedicating more than £15 million of additional funding to ensure people can access debt advice when they need it. Similarly, we were pleased to see certain credit card providers and mortgage lenders extending a ‘grace period’ to people who fall behind on their repayments.

“Even so, we remind borrowers how important it is to talk to a debt adviser before things reach the stage where they’re missing payments of any kind: taking steps to tackle their debt today is virtually certain to improve their chances of getting through the recession with their finances in a good state.”

Via EPR Network
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