Rising bankruptcy numbers, high interest rates and the ongoing "credit crunch" in the banking industry point to the market for individual voluntary arrangements (IVAs) getting tougher in 2008.

Industry analysts are predicting lenders will become less likely to agree to individual voluntary arrangements as 2008 progresses – which suggests that people in financial difficulty should make enquiries about an individual voluntary arrangement now to increase their chances of success.

Banks becoming less willing to agree individual voluntary arrangements

Millions of home owners have been badly affected by five interest rate increases since August 2006, with December's rate cut doing little to ease the pressure. Mortgage costs remain high because of the interest rate at which banks lend to each other, which actually went up in December despite the Bank of England's base rate cut.

Discouraged from borrowing from each other, banks are short of cash themselves (the so-called "credit crunch") which is making them excessively cautious about the money they lend to consumers, and excessively harsh about consumers' repayments.

One effect of this is that banks and credit card companies are becoming less willing to agree to individual voluntary arrangements – debt arrangements spread over several years which do not pay off all the debt.

Terms of individual voluntary arrangements made tougher

Those that do agree are likely to raise the amount they want repaid. According to financial news website thisismoney.co.uk, "banks and credit card companies that used to accept IVAs if borrowers agreed to repay as little as 25% of the sum owed, are increasingly taking a hard line, leaving those with severe debt problems to flounder."

In November, the Daily Telegraph reported that the number of Individual Voluntary Arrangements had fallen dramatically over the previous three months, while the number of bankruptcies had risen.

Bankruptcy carries more stigma than an individual voluntary arrangement, but people who are refused individual voluntary arrangements frequently have no other choice but to declare themselves bankrupt. And that, the Telegraph believed, was behind the rise in bankruptcies.

Individual voluntary arrangement situation set to worsen

Since then, the most commentators agree that the economic situation has worsened. The Council of Mortgage Lenders warned in November 2007 that the number of home repossessions during 2008 looked likely to reach levels last seen during the 1990s house price crash.

If the situation were to worsen as predicted then individual voluntary arrangements would get harder to arrange as well.

The conclusion to be drawn is that anyone with debt problems should take steps to sort them out now. Solutions like the individual voluntary arrangement that might be available now – albeit with harsher conditions than previously – might not be available at all by this time next year.

Talk to Varden Nuttall about an individual voluntary arrangement.

Varden Nuttall has been established for more than 15 years and is dedicated to helping people in financial difficulty find a debt management solution through an individual voluntary arrangement (IVA). We employ 90 people, including trained and skilled individual voluntary arrangement administrators, we are one of the largest individual voluntary arrangement companies in the UK and handle more than three per cent of all individual voluntary arrangement applications. To find out more about the company, or to make an appointment to talk about putting an individual voluntary arrangement in place, call us today on 0800 031 9802 or fill in our online enquiry form.