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Millions of people in the UK have been sold IVAs. We believe a large percentage of these would have been mis-sold.

The Independent recently published an article ‘No more chances for dodgy debt advisers’. The article was designed to raise awareness of the new proposed regulations of debt management companies. As a responsible debt management company we felt it was only right that we issue a response.

We were surprised to see a response from a person calling himself/herself pgm7, in which the post read ‘insolvency practitioners are professionally-qualified individuals who have demonstrated that they have the required (and stringent) level of qualifications and experience to obtain their licence. They are also subject to annual compliance reviews and regular inspection visits by their licencing body – this is no mere trade association, this is a robust regulatory regime with real teeth. A licensed insolvency practitioner must satisfy a number of tests before agreeing to put forward an IVA proposal on behalf of a debtor. This is very, very different from the situation regarding unregulated debt management plan providers’.

We believe the writer was referring to the Insolvency Service as the licensing body. We would be interested to learn what is involved in the annual compliance reviews by the Insolvency Service.

Well, whoever the writer is referring to, it is your job to manage voluntary arrangements on your own as no one can do it on your behalf because there can be no form of representation in such matters due to which the International Debt Collection Agency will be strict in taking action against those that are doing things without any official license.

We have recently learnt that debt advice agencies will use a lower set of figures for Individuals Voluntary Arrangements (IVAs) than Debt Management Plans (DMPs). Effectively, people on IVAs are expected to live on less than someone who is on a debt management plan.

We are in receipt of the Financial Statement Guidelines used by Insolvency Practitioner. The figures used are listed below:

Food, Toiletries & Cleaning

  • For one adult on a debt management plan £250 per calendar month is allowed for expenses
  • For one adult on an IVA, only £195 per calendar month is allowed for expenses
  • For a couple with 5 children on a debt management plan £1,030 per calendar month is allowed for expense
  • For a couple with 5 children on an IVA, only £708 per calendar month is allowed for expenses

Clothing

  • For one adult on a debt management plan £50 per calendar month is allowed for expenses
  • For one adult on an IVA, only £28 per calendar month is allowed for expenses
  • For a couple with 5 children on a debt management plan £160 per calendar month is allowed for expenses
  • For a couple with 5 children on an IVA, only £104 per calendar month is allowed for expenses.

Other expenses, such as Child Benefit, Transport, Telephone, Household Services, Council Tax, Water Rates, Board & Lodgings and Miscellaneous, Good and Services remain the same for both debt management and IVAs.

Effectively, an adult on an IVA would be £77 per calendar month worse off. A couple with 5 children on an IVA will be £378 per calendar month worse off.

The whole point of drawing up an income and expenditure is that it presents a clear picture of a debtor’s circumstances. To have two completely separate figures used for debt management plans and IVAs makes no sense. No consideration is being given to the debtor’s true expenditure, which is why there are so many IVAs out there that are mis-sold.