During my research I came across this startling statement on the Debtbuster IVA web site : Don't believe websites or companies promising to wipe 100% of (sic) your debt - this is not legal! Avoid paying back 75% of your debt with us, the legal way.
It may be legal - but is this really the way to sell IVAs ?
I have looked at a lot of web sites over the past two years and I have seen a lot of dubious claims but I don't recall seeing any company promising to wipe out 100% of anyone's debt. But the Debtbuster statement sets up this 'Aunt Sally' and then claims that it is not legal.
It may not be an IVA but if there is a financial Svengali out there who can persuade all creditors to write off everything they're owed then why would that be illegal ? After all, if you haven't got a bean and you are made bankrupt then it is unlikely that creditors would get anything.
Personal bankruptcy is perfectly legal and in certain dire circumstances it is also true that creditors will be left with no choice - they will have to write off 100% of the money owed to them. That's why - in some cases - debtors are better off declaring themselves bankrupt rather than taking up an IVA.
But what of Debtbusters claim that debtors can avoid paying back 75% of their debt the legal way ?
This is misleading. The percentage of debt that any debtor will be required to pay under the terms of an IVA will be entirely dependent upon their circumstances. No insolvency practitioner can say in advance what the final percentage setlement (the dividend) will be. The figure has to be agreed with creditors.
Even if creditors did agree to a dividend of 25p - seemingly writing off 75% of their claim - that is the minimum amount that they expect to receive. If, during the course of the IVA, the debtors financial circumstances improve then they would be expected to pay more.
IVAs are not a legalised form of debt avoidance ! They were introduced as a means whereby debtors would be given statutory protection in return for the creditor receiving more money than they would be likely to receive in a bankruptcy.
If creditors cannot achieve a better return through an IVA they will simply reject the proposal and petition for bankruptcy.
The problem with sellers like Debt Buster is that their initial 'come on' gives debtors a false impression of what IVAs are all about.
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