UK Debt Management Firms Hitting Snag Over Payment Plans

Things are not looking great for debt management firms across the pond, as shares plunge amid signs creditors were becoming increasingly reluctant to back IVAs.

A bit of background: debt management firms in the UK are similar to the debt management firms here.  They allow debtors to consolidate past-due accounts and make smaller payments.  And IVAs?  Those are Individual Voluntary Arrangement, a legally binding repayment agreement between debtor and creditors. They’re usually seen as preferable to bankruptcy.

Unfortunately for UK debtors – creditors are not as enamored of the IVAs as they used to be.  In an IVA, debtors can have up to 75 percent of the debt written off.  Creditors are thinking that, “You know? That 75 percent would be pretty nice to have in the coffers.”

IVAs are almost de rigeur among the debt management set.  This new set of circumstances – IVAs now being out of vogue – is having a direct effect on debt management firms’ bottom line.

Also, the public shunning of the IVAs couldn’t come at a worse time for a brand new crop of IVA providers.  Before, banks were pretty “meh” about the whole thing, which lead to a resounding, “Heck, yeah!” from the IVA contingent – but then the banks were all, “Wait; this sucks,” and now the IVA guys are feeling pretty “Rats!” about the whole thing.