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Banks To Shut Down I V A Escape Route


Realistbear
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http://www.thisismoney.co.uk/credit-and-lo...p;in_page_id=62

Banks to seal debt escape route

Dan Atkinson, Mail on Sunday
12 November 2006
THOUSANDS of people trying to escape some or most of their debts could be stopped in their tracks by a new centralised service offered to banks and other lenders.
Rather than enter into an Individual Voluntary Arrangement, in which borrowers propose to pay back a slice of their debts and have the rest written off, many would have arrangements rejected and be told to pay back everything they owe.

I can see WHY the banks are anxious not to lose billions in the miracle economy but surely this idea will kill the golden goose? After all, the whole thing has been based on miraculous levels of borrowing and spending. If the people now have to pay back what they owe they won't borrow as much. :lol::lol::lol:

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Guest muttley

it's always amazed me how many of these things are accepted - for any, the lenders have the option to say 'no' and force the borrower into bankruptcy

If the lender forces the borrower into bankruptcy he probably gets nothing. An IVA allows him to get something back. If someone owed you 10k and offered you the choice of paying back 4k over 5 years or nothing at all, you might prefer the former.

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http://www.thisismoney.co.uk/credit-and-lo...p;in_page_id=62

Banks to seal debt escape route

Dan Atkinson, Mail on Sunday
12 November 2006
THOUSANDS of people trying to escape some or most of their debts could be stopped in their tracks by a new centralised service offered to banks and other lenders.
Rather than enter into an Individual Voluntary Arrangement, in which borrowers propose to pay back a slice of their debts and have the rest written off, many would have arrangements rejected and be told to pay back everything they owe.

I can see WHY the banks are anxious not to lose billions in the miracle economy but surely this idea will kill the golden goose? After all, the whole thing has been based on miraculous levels of borrowing and spending. If the people now have to pay back what they owe they won't borrow as much. :lol::lol::lol:

Nope - this keeps the Golden Goose alive and well. The banks loose lending criteria rely on people repaying the debt except in the most extreme of circumstances. If they were able to wiggle out of repayment through IVAs then banks would have to increase the default risk component of their credit risk models, and hence tighten lending. Economic conditions may soon raise the default risk anyway, but I'm afraid this particular story is bad news for HPC...

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Nope - this keeps the Golden Goose alive and well. The banks loose lending criteria rely on people repaying the debt except in the most extreme of circumstances. If they were able to wiggle out of repayment through IVAs then banks would have to increase the default risk component of their credit risk models, and hence tighten lending. Economic conditions may soon raise the default risk anyway, but I'm afraid this particular story is bad news for HPC...

i disagree - i think it will mean that people will be paying back more of their debts for longer than under an IVA, a few may choose bankruptcy

having said that, the actual numbers are minimal in the grand scheme of things

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Nope - this keeps the Golden Goose alive and well. The banks loose lending criteria rely on people repaying the debt except in the most extreme of circumstances. If they were able to wiggle out of repayment through IVAs then banks would have to increase the default risk component of their credit risk models, and hence tighten lending. Economic conditions may soon raise the default risk anyway, but I'm afraid this particular story is bad news for HPC...

Is that a "Bull" option or a "Neither" opinion? <_<

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no it's not. It will discourage the loosest of the loose cannons. And the models, btw, are adjusted daily.

DIscouraging the loosest of loose cannons also reduces the default risk, due to reduced adverse selection. Hence the (frequently updated) lending models will loosen credit to the remaining applicants. Whether the net effect is a tightening or loosening of credit is hard to say, but I'd argue it is a net loosening.

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Guest Charlie The Tramp

Bankruptcy > can`t pay no alternative. IMHO the Enterprise Act will in the future be tightened and many p**s takers will be in for a shock. In the Bankruptcy Courts today many are being further investigated by the Official Receiver`s Office, around 800 according to the stats.

IVA > I will take the P**s, owe you £50k after spending irresponsibly and do you a favour and pay back £20k over 5 years without interest.

I had a commercial customer who owed us a considerable amount of money in the mid 90s and claimed he could not pay. He offered an IVA to pay off 10% of the debt. I refused and threatened him with bankruptcy, suffice to say he repaid in full within 14 days and is still trading today.

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I had a commercial customer who owed us a considerable amount of money in the mid 90s and claimed he could not pay. He offered an IVA to pay off 10% of the debt. I refused and threatened him with bankruptcy, suffice to say he repaid in full within 14 days and is still trading today.

That's exactly what I'm surprised the banks aren't doing more of. Even if it means repaying over 15 or 20 years. That or bankruptcy. Take your pick.

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Guest mattsta1964

If they can't IVA they can go bankrupt still?

TBH making people pay back the money they've spent is a fantastic idea.

If people know they will never have to pay back the money, then everyone would borrow up to the hilt, have a ball!, and then declare themselves bankrupt. It's obviously pretty damn important that kinda situation doesn't happen!!!!!

People should definitely be forced to pay off their debts or have them underwritten. Otherwise the value of money will be undermined (more than it has been already!!!)

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If people know they will never have to pay back the money, then everyone would borrow up to the hilt, have a ball!, and then declare themselves bankrupt.

If the banks thought that was the case they wouldn't lend the money in the first place, at least not at such low rates. As I said earlier, this will allow banks to continue offering cheap credit to those able to repay it.

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That's exactly what I'm surprised the banks aren't doing more of. Even if it means repaying over 15 or 20 years. That or bankruptcy. Take your pick.

Yes, but we're coming at it from a certain position, are we not? IVAs actually enable more air to be pumped into the debt bubble, as opposed to bankruptcy. Some banks may get greedy and demand full payment but they'll end up losing either way - better to get something than nothing.

What's the only thing keeping this ludicrous miracle economy afloat? Cheap and easy credit. I can't see the banks or Gordo wanting to tighten or the whole deck of cards will collapse.

Makes me wonder if my relatively frugal and non debt lifestyle is really worth it. <_<

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what this is is a further tightening of credit conditions. now banks are fearing for their money. they just instruct their 'recovery' deparments to stop being so nice to the debtors. for most of the overleveraged it will be the thing that tips them into bankrupcy. which means they have to sell their houses too in order for the creditors to get their money !!

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what this is is a further tightening of credit conditions. now banks are fearing for their money. they just instruct their 'recovery' deparments to stop being so nice to the debtors. for most of the overleveraged it will be the thing that tips them into bankrupcy. which means they have to sell their houses too in order for the creditors to get their money !!

You really believe that most people applying for IVAs would have to declare bankruptcy if they weren't granted one? The stats will tell us soon enough, but I don't see this leaing to lots of future repossessions, just reduced bad debt provisions for UK banks.

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I don't know, most likely no one does but banks will want their money back by whatever means is available to them. problem is where is that money going to come from. this is just the begining when people went debt mad they borrowed from the future to live today. now in tomorrow they have to pay from current assets or income from the future. its their (creditors) choice but if they had the assets they could just pay the debts.

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I'm unfortunate enough to have BEEN THERE. I had a sudden business failure due to sept 11th and tried to struggle on (first mistake) for another nine months before opting for a one off IVA.

I had banks, credit card co's chasing me for nine months threatening me with bankrupcy. I told them to go ahead and save me the £400 fee. Cut a long story short I didn't pay anyone anything for nine months (there's little point when you're up to your neck to the tune of a hundred big ones).

Cut a very long story short I offered my banks etc a one off IVA which meant paying back around 40% of the total debt immediately by borrrowing from family and continuing to work VERY hard or bankruptcy in which I'd pay back nothing as I wouldn't return to work.

Considering the money they had squeezed out of me while things were going good they hardly lost out.

The banks are actually VERY helpful when things get to this stage as they know that the alternatives are chasing you around and around for nothing. I was always phoning them updating them of the situation.

Basically if you've nothing to lose you may as well go bankrupt anyway.

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I'm unfortunate enough to have BEEN THERE. I had a sudden business failure due to sept 11th and tried to struggle on (first mistake) for another nine months before opting for a one off IVA.

I had banks, credit card co's chasing me for nine months threatening me with bankrupcy. I told them to go ahead and save me the £400 fee. Cut a long story short I didn't pay anyone anything for nine months (there's little point when you're up to your neck to the tune of a hundred big ones).

Cut a very long story short I offered my banks etc a one off IVA which meant paying back around 40% of the total debt immediately by borrrowing from family and continuing to work VERY hard or bankruptcy in which I'd pay back nothing as I wouldn't return to work.

Considering the money they had squeezed out of me while things were going good they hardly lost out.

The banks are actually VERY helpful when things get to this stage as they know that the alternatives are chasing you around and around for nothing. I was always phoning them updating them of the situation.

Basically if you've nothing to lose you may as well go bankrupt anyway.

Good to know that at least someone has benefitted from IVA in the way they were originally intended: to make business failure less disastrous. :)

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less disastrous for who? The person who failed? Or the poor sods who trusted him???

The person who failed. Lots of small businesses fail, but overall it is healthy to encourage entrepreneurship. Reducing the stigma of business failure and allowing such people to dust themselves off and try again stops us being too risk averse as a society. Of course consumers and trading partners should be protected too, but you can't remove all risk without killing innovation at the same time.

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The person who failed. Lots of small businesses fail, but overall it is healthy to encourage entrepreneurship. Reducing the stigma of business failure and allowing such people to dust themselves off and try again stops us being too risk averse as a society. Of course consumers and trading partners should be protected too, but you can't remove all risk without killing innovation at the same time.

so what changed that required this modification to the way business is conducted? It seemd to have been working ok up to about... oh, I don't know... 1997?

Edited by PropertyGuru
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