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20 January 2006
The rise in debt problems has seen the number of people setting up individual voluntary arrangements (IVAs) soar by nearly 75 per cent in 2005, new research has shown.
Professional services firm KPMG the average person setting up an IVA owed £60,000. However, creditors were expected to recoup just 38 per cent of this.
IVAs are a system by which debtors reach an agreement with their creditors for interest on their debts to be frozen, in exchange for them paying back a set amount each month.
Steve Treharne, head of personal insolvency at KPMG, said: "Typically the sort of debts we are talking about here are personal loans, credit card balances and other forms of buy now, pay later unsecured loans.
"Given the average level of debt, too many people are borrowing money that they have no realistic hope of repaying."
KPMG also revealed that more young people are getting in to debt with those as young as 19 owing three times as much as their annual income.
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