Banks could be sued by IVA companies
According to a recent report a number of IVA companies are looking into suing UK banks for hindering the IVA process and therefore promoting an increase in the number of bankruptcies within the UK. IVAs, or Individual Voluntary Arrangements, are designed to try and help struggling borrowers that are swamped in debt to deal with their debt problems without having to resort of bankruptcy.
The IVA firms state that banks in the UK are aiding an explosion in the number of bankruptcies by doing their best to hinder those trying to sort out their debt problems through an IVA. Banks are accused of placing barriers and problems in the way of borrowers that are trying to address their debt issues through an IVA, leaving them with no other choice than to opt for bankruptcy. Legal action may be taken by the Debt Resolution Forum, which is an industry body that represents a number of debt management and IVA firms.
According to the report the Debt Resolution Forum plans to challenge fees that are charged by the Insolvency Exchange, which represents a number of lenders, which are resulting in IVAs becoming an unviable option due to related costs and are driving some IVA advisors out of business altogether. One officials from the body stated: 'Unless an effective new deal is reached, an explosion in bankruptcies is likely.'
According to the Insolvency Service, which is part of the Department for Business and Enterprise, creditors are often 'effectively refusing to vote in favour of IVAs where the fee is above a certain level'. The agency added: 'The longer-term effect could be to push more people into bankruptcy, where creditors would get an even lower return.'
22nd August 2007