In the first quarter of 2007, there has been seen fundamental changes in the marketplace of an IVA for both the companies offering IVA plans and for the people who are trapped in debt issues and seek to use an IVA to solve their debt issues.
According to the latest facts and statistics available ( from Quarter 4 2006), it has been seen that overall insolvency is still on rise but now many of the debtors are opting for the bankruptcy option as opposed to an IVA. When these statistics are compared with the statistics of the quarter 3, 2006. It has been seen the major reason behind all this sudden statistical change is that banks and other financial institutions are changing their regulations and becoming aggressive in dealing with the IVA applications and in most cases rejecting IVA proposals. The reason banks are rejecting these proposals is that their bad debt provisions are on rise from the past few years and they have realized that the major reason for debt increase is IVA companies touting for debtors to enter into an IVA proposal. The bank’s attitude towards an IVA means that financial institutions offering IVA now have to fight much harder and spend more marketing money in order to retain or expand their own IVA market share. The proof of this broadly increased marketing spending on IVA can be seen in the national press or on TV
Also, the levels of fee which an IVA company can charge are also coming under immense pressure from the creditors. The creditors often want a greater percentage of the debtors' available IVA contributions in return for a "yes" vote. As the overall IVA pot is reasonably fixed hence there is no real way for IVA companies to increase their total fees. There is every reason to believe that this downward pressure on IVA fees will continue and margins will get tighter for everyone. The IVA companies may be able to reduce their costs, or divert into related financial services, to diminish the lower IVA margins, but the overall financial returns are likely to suffer.
One of the major factors which IVA companies need to understand is that there are no visible market barriers for the new companies to enter and offer IVA solution. There are now in excess of almost 500+ IVA companies offering their services which as a consequence might increase the costs for all other companies. Many smaller finance brokers and Independent Financial Advisors (IFA) are now offering introductions to an IVA solution which was not apparent two years ago. Many smaller IVA introducers may well fall by the wayside as their profits get further squeezed by the more established companies with deeper marketing pockets.
For the consumers with major debt issues and no assets, there are only 3 methods of debt consolidation to be considered which are as follows:
Pro Rata (Debt Management Plan)
In most of the events when IVA gets rejected by the creditors then most of the debtors would probably be financially better off applying for a personal bankruptcy. According to the most recent bankruptcy legislation, a debtor would only be usually liable to make contributions up to three years of time period and in many cases just for a year. Conversely, under Pro Rata the debtor would continue to make contributions until the whole of the debts were cleared often many years into the future. Those banks and credit card companies now being far harsher with IVAs seem to be relying on the assumption that most debtors so rejected will not apply for personal bankruptcy, because the banks will get virtually nothing if the debtor goes bankrupt.
There is a great deal of uncertainty for the future of IVA market place. No one can assume what will be its future. However, it is a very lucrative option for the people who are trapped in debt.