Debt Solutions Helpline – which acted as an intermediary between debt management providers and IPs – is being wound up with estimated total liabilities of almost £200,000.
Martin Halligan of MPH Recovery was appointed liquidator of the company.
According to its directors' report to the meetings of creditors the Manchester-based company cited a downturn in the number of suitable debt referrals.
Rejection rates for IVA cases offered to IPs rose from about 5% to more than 30%.
Director of MPH Recovery, David Hodgson, believes the company's liquidation represents a sea change in the debt management industry.
"There is a lot of work involved with an IVA if you’re an IP – you have to monitor the monthly payments – it means a lot of work for not a lot of income," he explained.
"It’s easier to deal with one bankruptcy than one IVA - the fees received by IPs are going to be at least as much if not slightly more when it comes to dealing with bankruptcies.
"IVAs used to be a fantastic alternative to bankruptcies but, in this day and age, what’s the point in doing a five-year IVA if a bankruptcy lasts six to 12 months?"
Debt management company Moneyworries was the sole referral provider for the helpline.
It would review the debtors in its debt book and ascertain whether they would be better suited to an IVA before referring the client to the helpline.
Although the number of cases handled by the helpline rose from about four a day after its incorporation in April 2008 to at least 30, a growing number failed to meet the IVA criteria required by IPs.
The company – which was originally based in Leeds – was created by directors David Moore and Stewart Rankin Lessells.
By Andy Pearce