Debt Advisory Centre

December 20, 2011 07:33 ET

The Debt Advisory Centre reminds UK families that an IVA can be an affordable way out of debt

LONDON, UNITED KINGDOM--(Marketwire - Dec. 20, 2011) - The Debt Advisory Centre is urging people to consider an IVA or Individual Voluntary Arrangement as an alternative to bankruptcy if they cannot afford their debts. This is in response to the Aviva Family Finances Report, which states that more than half (52%) of UK families owe just under half their annual income on unsecured debt and are cutting back elsewhere to keep their debts affordable.

In November this year, the Report indicates, the typical family with unsecured debts owes £10,604 on credit cards, personal loans and overdrafts. The average household income in the UK at this time is £23,796.

The average family in debt spends around 9% of its annual income on debt every year. That equates to around £224 every month. Many families are cutting back elsewhere to keep these payments affordable.

Many families can only afford their unsecured debt payments by cutting back on their non-essential spending, like savings and holidays, according to the report. Savings fell to £19 per month in November this year, one quarter of these families spend nothing on recreation and holidays and 52% spend nothing on children's activities.

While many people are making sacrifices to keep their debt repayments affordable, that may not be enough if a change in circumstances, or unexpected expenses, make keeping up with repayments impossible.

A spokesperson for the Debt Advisory Centre commented: "Many families in debt in the UK are cutting back on non-essential spending so that they can afford their debt repayments. Sometime it's only a temporary measure until their circumstances improve. However, if you or your family have tried these measures already and still can't afford your repayments, an Individual Voluntary Arrangement, or IVA, is one option.

"An IVA is a debt consolidation solution that lowers your payments to an affordable level, usually for five years. You would need to commit to making regular payments for the entire IVA: if an IVA fails you could be made bankrupt. It would also affect your credit rating for six years, making it more difficult to borrow money. However, if debt has become a problem, borrowing more money is not advisable anyway. You really need to focus on repaying what you already owe.

"Generally, you may be eligible for an IVA if you have more than one unsecured debt, you can't afford the repayments and you can't afford to repay those debts in full within a reasonable period of time. If you're a homeowner, you may be asked to release equity in your home during an IVA, whereas if you went bankrupt, you may be forced to sell your home.

"The actual amount of debt a family has isn't really the main issue. What counts is whether they can afford to repay it. A family with above-average unsecured debt may still be able to afford their debt. Similarly, a family with a lower level of debt could just as easily struggle to afford that debt. If you can't afford your monthly payments, speak to a debt expert now."

Notes to Editors

The Debt Advisory Centre offers expert debt advice, as well as a range of debt solutions for people facing financial difficulties.

For more information, visit the Debt Advisory Centre website at www.debtadvisorycentre.co.uk.

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