Comments What do you think?

• Anonymous | 11:23 13 January 2010

  We think that the figure of 29% of debtors saying that their attention was not drawn to other debt solutions is misleading.
  
  Those concerned have been asked to cast their minds back to a time when :
  a) they were under pressure from their creditors, possibly desperate for a solution,
  b) they were perhaps under pressure from their partner, perhaps desperate to save their relationship,
  c) they received an substantial amount of new information, which they had to take in and understand and they were given an enormous amount to read, required by statute & best practice, and
  d) having done all they could they had to wait at least 17 days, possibly 31 days (or longer) to know whether it would work ie to know whether the IVA had been approved.
  
  While there will no doubt be some bad practice to be weeded out in less scrupulous IVA provider companies evidence of this nature does rather seem to be open to question, and the suggestion that it is "alarming" seems to me not to help..

• Miss Chief | 12:15 13 January 2010

  HMMMM - No home ownership, earning under £30K. Suggests debtor is not a professional with a qualification to retain by virtue of an IVA. Credit score shot practically as badly in an IVA as in Bankruptcy.
  
  I think most lay people, when told the true effect of an IVA compared to the real effects of BKY (i.e. a likely early discharge and no IPO) against potentially rising payments for 5 years, would opt for the latter.
  
  Too many middlemen selling IVA's when they are not the appropriate route for the debtor, methinks.
  
  
  
  
  
  

• Anonymous | 12:21 13 January 2010

  Dear Miss Chief
  
  If you listened in to the calls we receive you would be amazed how many people still want to stay as far away as possible from bankruptcy!
  
  Yours
  
  IVA Co IP

• Miss Chief | 12:50 13 January 2010

  That is as a result of ignorance and exactly the response I would expect from an IP (who no doubt acts as supervisor for these luckless people).
  
  In most cases an IVA is not appropriate. It serves to create costs and hardship to the debtor. It results in minimal return to the creditors, who really couldn't care less anyway, having sold their debts on before the matter even comes before an IP.
  
  For professionals, company directors and in certain other cases it may be worth an individual entering an IVA. However, just like pre-pack admins - give the profession a tool and they will abuse it. Hence the proliferation of (un qualified) debt advisors passing hapless members of the public to IVA factories, presumably for some form of intro fee, when they should be advised that BKY is the way to go.
  
  
  
  
  
  

• Anonymous | 13:03 13 January 2010

  Point one Yes there are costs, but the resuklt of a successful IVA is the best one for the creditors and the best for the debtor - which is why the law encourages it.
  
  Point two - The creditors expect that the debtor will make their best offer - and the IVA process is structured to give credence to that and to enable a proper offer to be enforced
  
  Point three - where a debt is sold on it is no longer a matter for the original creditor, but for the purchasing creditor, who clearly now wants a return
  
  Point four - the word ignorance is used for debtors - I suggest that for the (as it sounds in the case of the person with whom I am communicating here) outsider to the process it may be prejudice which speaks in such general terms of abuse.
  
  Point five - I am amazed at how many people call in to us, hear all the solutions clearly presented to them, are advised by us to choose the bankruptcy route, but have their own reasons for instead going for an IVA.

• Anonymous | 13:46 13 January 2010

  Err...
  
  "29% of debtors said that they were not advised that other forms of debt relief were available before they took out an IVA."
  
  "almost 80% of debtors had been through an alternative form of debt solution before entering into an IVA."
  
  My thingers and fumbs are really mixed up now!
  
  
  

• Miss Chief | 15:53 13 January 2010

  I think IVA's are abused. They are not always quite the recovery result intended, and if they cause the likes of Max Recovery to post huge profits, then they are really just creating a business model for debt purchase organissations.
  
  Certainly most of the debtors I see are under the missaprehension that BKY is heavily stigamtised and punitive, when it simply is not. That is why I find most people when told the facts, opt for BKY. Indeed, many debtors I see, seem to also believe that they will lose their home if they go bankrupt, will not be able to secure clearing bank facilities and that an IVA will not harm their credit rating as badly.
  
  Nonetheless, if they still want an IVA I do provide details of two of the larger factories as I cannot compete with their rates. Some of the factories no doubt do a commendable job, it is how the debtor gets to them that concerns me.
  
  
  

• Anonymous | 16:46 13 January 2010

  Miss Chief, you're not that bad tempered bird from Manchester are you?

• Miss Chief | 19:13 13 January 2010

  No not at all - I'm a snowed in IP from London, a bit bored and thought I would seek to create a little controversy with a few strong opinions.
  
  

• Anonymous | 08:23 14 January 2010

  Actually the one & the same first two anonymous contributors above (a non-snowed in IP in London) has considerable sympathy for the views of Miss Chief.
  Having said that I honestly believe that IVAs are the best thing to have happened in insolvency "since sliced bread". But, put the system in the hands of those who are inclined to, and are able to, twist it and .....

• Anonymous | 08:28 14 January 2010

  Incidentally what's the betting that a survey would find that those 80% of debtors who have gone through a previous alternative debt solution have been on a debt management programme with the same company with whom they are now on an IVA.

• Michael Peoples | 16:23 14 January 2010

  I work for a medium sized practice and we have been doing consumer and business IVAs for over ten years. We like most firms spend a huge amount of time discussing the options with our clients and of those who actually come to us, less than a fifth opt for an IVA. Even of these, the majority would be better off in bankruptcy but do not wish the perceived stygma of bankruptcy but also feel that they are honourable people who borrowed in good faith. If they can reach an accommodation with their creditors, at a level they can afford, for a period of time that is set, they are happy to do this. They are not stupid or ignorant but genuine people with genuine problems. Many are repaying loans with terms longer than the IVA and others have already been in unsuitable debt management plans where they would have been repaying for the rest of their lives.
  
  IP firms get a bad press yet most debtors are advised to go to so called debt charities who receive commissions from the banks for collecting the debts. The fees IP receive from IVAs have been slashed in recent times and firms like ours would make more money operating debt management plans as we would receive 15% of the contributions until the debts had been repaid in full and given interest and charges are not always stopped this could be substantial.
  
  Finally, this survey refers to the protocol IVA system which is not operated in all cases or by all IPs. This may explain why the average debtor is employed, non homeowner, income less than £30k and debts of under £50k. Protocol is not suitable in a huge number of cases where clients own properties or businesses and this is not made clear.

• Anonymous | 19:06 14 January 2010

  Miss Chief
  
  I'm very surprised that you're bored, being an IP and in the Smoke and all. I thought it was all excitement down there!
  
  

• Sean Mason | 23:15 14 January 2010

  Having attended the Debt Resolution Forum ~(DRF) at their annual November meeting last year, I was interested to learn that before this report was published it was previously sent to the DRF in advance of any publication - so who knows? Was the information tempered down? Does this reveal a true reflection of the actual position?
  
  The facts still remain alarming that 29% of debtors said that they were not advised that other forms of debt relief were available before they took out an IVA so one could interpret this that 29%, or possibly more, of the individuals who were involved in this report, may have been better off in bankruptcy rather than than an IVA. There have been some very interesting reports carried out over recent years into the success of IVAs and I am very interested to read the comments above. It could be said that in a number of cases, IVAs have been entered into for the profit of the IP as opposed to it being the correct debt solution for the individual, the IPs certainly benefit from having professional bodies and qualifications to "hide behind" and to some extent this assists and shields certain IPs from the suggestion or allegation that perhaps the individual's best interests were not of paramount importance when deciding on the best debt solution. Granted there are cases where individuals feel they have a moral obligation to enter into a formal arrangement with their creditors to repay debt and therefore would not chose bankruptcy as an option and I see cases of this and in those circumstances an IVA could be the correct debt solution if an individual has had all options fully and fairly explained before making an informed decision. The Insolvency Service itself does not exactly help matters as when an individual visits them to learn or discuss about bankruptcy the Insolvency Service states that not only is bankruptcy a very serious option/choice but it also paints the starkest possible picture and certainly a lot of clients who I have spoken with in the past have been positively frightened out of bankruptcy with the advice which they have been given which, in a lot of cases, is simply not true.
  
  This means, a high percentage of individuals have opted for an IVA when the simplest and most straight forward and appropriate route out of their debt problems would be to consider bankruptcy. It still astonishes me the number of individuals who do not fully understand an IVA and what it means and how long it takes for creditors to start receiving money under their arrangement and just what level of fees the IP will receive for setting up the arrangement. I would be extremely interested to know the figures of those individuals who enter into an IVA were previously in a debt management programme with the same company who then later "suggest" and advise they reconsider and then enter an IVA. Further, I would be interested to know what level of fees, in total, the company would receive throughout the debt management programme and the IVA and that level of fees compared to the initial level of debt. That would be interesting.
  
  There is no doubt that the concept of IVAs is a good one. and in earlier years creditors accepted far less than they do today in order to agree to an arrangement. The simple truth is that IVAs worked when the return the creditors was in the region of 20p in the pound but in recent years this level has risen to circa 40p plus which, when you consider an individual's change of circumstances, can make these arrangements quite simply - unworkable - especially with the current economy facing the current crisis which it is in and the amount of uncertainty there is in most people's lives today.

• Miss Chief | 13:38 15 January 2010

  Loads of work down here, most of which is poor quality. What happened to virgin directors who knew nothing of insolvency as they hadn't experienced it (numerous times) before. Come to think of it, what happened to meaty assets in jobs ? Something of a digression from the IVA topic - sorry.
  
  
  

• Anonymous | 08:58 18 January 2010

  Sorry Sean - I don't understand - why doesnt a 40% return IVA work, provided all the usual flexibility and ways of dealing with issues arising in the IVA are there? Sounds perfectly good for all concerned to me.

• Michael Peoples | 13:24 18 January 2010

  I think whether it is 20p or 40p it is irrelevant. What has changed is the affordability of debtors and arbitrary figures being plucked out of the air. Proposals are more likely to fail if the income and expenditure account is too tight and some creditors are attempting to squeeze every last penny out of debtors. This is very shortsighted because while the debtor may accept the uplifts at a meeting and the new dividend can be calculated accordingly, a subsequent failure and bankruptcy means the total loss of the debt.

• Miss Chief | 12:10 21 January 2010

  Just as I thought I had gotten over all this.
  
  I have just seen a debtor who is in an IVA with Synergi (now bust themselves).
  
  Debtor paid £700.00 to the debt counsellor who referred them to Synergi. Debt counsellor did nothing else it seems, but pick a telephone.
  
  Synergi charged £3750.00 plus VAT to draft a consumer proposal - payable from the IVA fund.
  
  Creditors were circa £60K.
  
  Synergi paid a £500.00 "special managers fee" from the debtor's contributions within the IVA (presumably a further kick back to the introducer ?).
  
  Within one year Synergi's supervisor's time accrued to over £5K so their charges were in excess of all funds realised.
  
  Synergi appear to have taken an element of the nominees fee twice having recevied £1000 from the debtor in advance - yet still drawing the full noms fee from the IVA.
  
  The debtor claims to have been hard sold the IVA and had no understanding of the likley costs.
  
  30 months later there is nothing in the pot for creditors who have recevied no dividend. The debtor is terrified the home will be lost as there needs to be a remortgage in 18 months or so and there is no chance of any mortgage company proving a new loan.
  
  A very likely miss-sold, overcharged and pisspoor IVA in my view.
  
  I bet there are many, many thousands of situations like this out there.
  
  
  
  
  
  

• Anonymous | 12:33 21 January 2010

  I cannot speak for Synergi but this client does have recourse. He should first of all contact Cleardebt who bought Synergi after the parent company Relax went into administration recently. Cleardebt are a highly reputable firm who will investigate and find out what happened to this client's money. If he has been badly treated he can also complain to the regulators.
  
  'A very likely miss-sold, overcharged and pisspoor IVA in my view.'
  
  I respect your opinion and you have full knowledge of the case but the debtor had large debts, could afford payments from his income and had a property he wished to protect. On the face of it that seems like the basis of a proper IVA regardless of the treatment the debtor received from his chosen IP. To state that there are likely many thousands more cases like this is unfair to the insolvency business as the vast majority do a professional job for a reasonable fee. Without IVAs there would be many more bankruptcies, house repossessions and neverending debt management plans. This would not be to the benefit of creditors or debtors but the bankruptcy lawyers and IPs who specialise in bankruptcy cases would do very well.

• Miss Chief | 13:29 21 January 2010

  I am aware that Cleardebt have recently taken over the Synergi book of business. I would agree that Cleardebt are one of the decent factories and indeed that is where my firm recommends any consumer IVA debtor to go.
  
  I must say I do disagree that this particular case was correctly sold. The creditors have received nothing nor are likely to do so. The nominee would have known the likely costs and she should have taken them into account more accurately in the proposal and when advising the debtor. How many times have we seen the projected supervisor's level of fees actually doubled or tripled in the final R&P ?
  
  This debtor has made payments under hardship for two and half years and still faces the real prospect of bankruptcy and losing the home.
  
  In my view, it was poor advice, only Synergi (and of course their introducer) have benefitted from this, to the tune of about £9k, for providing what amounts to an entirely unnecessary service.
  
  I don't doubt that Mr Mond and his team will have their work cut out if this case is any indication of the type of performance Synergi have shown in obtaining and advising on other cases.
  
  
  
  

• Michael Peoples | 13:46 21 January 2010

  Sorry Miss Chief but I did not mean to post anonymously last time.
  
  I do accept that there have been abuses and for the past number of years creditors have been restricting fees to prevent them. This does not impact on the professional outfits [except where it gets to the stage that you are working at a loss] and these type of situations should not arise.
  
  I cannot see how the supervisor can justify such fees or why creditors have not objected on seeing the annual report and I agree that hopefully this is not the sort of thing that will crop up too often or Cleardebt will have a major headache.
  
  Personally, I hate the term selling an IVA although I do believe that many have been missold. I try and give my clients all the information I can and let them make up their own minds. I will advise but never sell and no one in our firm receives commission for signing up clients. We are all paid salaries and if the company does well we all benefit so it is in no one's interest to put clients into unsuitable IVAs that do not run their course. It is no good for the clients, the debtors or ourselves and brings the whole industry into disrepute.
  
  I do feel for your client who does seem to have been very badly treated but the IVA itself may not have been the wrong advice. IVAs done at a level debtors can afford with a realistic dividend and reasonable fees are a very useful tool in insolvency and many more thousands of people have been helped than ripped off. I do hope this particular debtor has his situation resolved and I know that Mike Morgan of Cleardebt is personally trying his best to help and reassure the Synergi clients.