Goldman Sachs is predicting a huge surge in personal insolvency, bankruptcy and IVAs over the next two years!
Analyst James Chappell of the investment bank warns: "We expect bankruptcies to rise by 40 per cent over the next two years.
"We also expect IVAs to rise at least as fast."
Young People Iva
According to The Debt Counsellors' research, 17.5% of people under the age of 26 seeking help for their debts owe between £20,001 and £50,000, while 1.4% owe over £50,000.
With levels of bankruptcy showing a marked increase, the signs are that going bankrupt is often considered the only option to young people in serious debt.
However, the Individual Voluntary Arrangement, or IVA, is designed as an alternative to bankruptcy which allows the debtor to continue earning while paying off a greatly reduced debt in affordable monthly instalments over five years.
The Debt Counsellors believe that young people in serious debt could benefit from increasing their awareness of the alternatives to bankruptcy, and therefore have produced the IVA Report, which provides details of the process as well as individual case studies and comparisons with bankruptcy.
"Bankruptcy can have a seriously detrimental effect on a young person's financial future. So we urge young people in serious debt to find out about the options available to them before opting for bankruptcy."
The IVA Report is the ideal place to start in the search for knowledge on dealing with chronic debt.
In 2007, the number of people applying for an IVA in the UK will surpass the number of people filing for bankruptcy for the first time ever. This is according to a report by the IVA Information Centre.
IVAs are already equal to bankruptcy in popularity in the UK. In the last quarter alone there have been 27,644 recorded insolvencies - a 460% increase from the whole of 1998, where there were less than 6,000 individual insolvencies in the UK for the year!
The main reason given for choosing an IVA over bankruptcy were family welfare and maintaining ownership of property.
Iva Not Bankruptcy
Official statistics show that bankruptcy is still on the increase in England and Wales, but debt help experts The Debt Counsellors say an IVA can help.
According to the Insolvency Service, there were 29,804 bankruptcies in the fourth quarter of 2006, 7.1% up on the previous quarter and 44.1% up on the corresponding quarter the previous year.
However, The Debt Counsellors believe that in many cases, the IVA, or Individual Voluntary Arrangement, can prevent bankruptcy.
Suitable for people with unsecured debts of over £15,000, an IVA can write off a large proportion of personal debt, the rest being paid off in affordable instalments over five years. Unlike bankruptcy there is no risk to assets with an IVA and there are no restrictions on doing business.
Also, an IVA freezes interest on the debt, prevents or halts legal action and wipes County Court Judgements (CCJs).
The Debt Counsellors said: "The IVA is often preferable to bankruptcy as it avoids the serious financial penalties of going bankrupt."
Iva Versus Bankruptcy
How does an IVA compare to bankruptcy?
The details are entered on a public register but there are no press or public notices.
The details are advertised via the press and public notices.
Current and future assets are safe as long as the terms of the IVA are met.
If you are made bankrupt you risk losing your current and future assets. Leased or hire-purchased goods will be returned.
There are no restrictions on business interests or future credit.
You are restricted from continuing in business in a name other than the one for which the bankruptcy was issued unless all creditors are informed.
You are also restricted from starting, managing, promoting or acting as a director for a company without the consent of the court, and from borrowing over £250 without disclosure of your bankruptcy.