Personal debt is currently at a record high, which means that more people will be consulting debt advisors or insolvency practitioners. In general, it’s the best possible thing to do in this situation — as long as you’ve chosen a reliable advisor.
The Current Debt Crisis
As I reported in a recent blog, personal debt is at its worst level since the height of the economic crisis following the 2008 crash. With income having increased more slowly than inflation over the past decade, many households are feeling the pinch.
There have also been record levels of personal insolvencies, which suggests that a far larger number of people are struggling to avoid insolvency. Since demand dictates supply, new advisors have been springing up, and while most are genuine experts who follow the regulations scrupulously, some are unregulated cowboys.
The Danger of Unregulated Insolvency Advisors
The problem can be illustrated by a recent experience of the reputable Somerset insolvency firm Hawkins Insolvency. They took over the case of a man who had been the subject of a petition by HMRC over unpaid taxes.
He had arranged finance to pay the debt, but unfortunately his now ex-accountant had referred him to an unlicensed advisor, who told him he didn’t need to attend court. In his absence, he was declared bankrupt, and the equity from his home would be held in trust.
No problem, the advisor told him, they could sort it out for £2,500. Instead, he turned to Hawkins, who proposed an IVA (individual voluntary arrangement) which could replace the bankruptcy and safeguard his home’s equity.
Regulating Insolvency Advisors
Insolvency practitioners are overseen and regulated by The Insolvency Service, which has powers to verify that advice is given impartially and professionally. A report last year seeks to tighten the regulations, setting practitioners a higher standard to meet.
The problem is that this only applies to advisors registered with The Insolvency Service. Unregistered advisors, such as the one involved in the case above, aren’t subject to regulations.
Hopefully, this will eventually be addressed, but in the meantime such firms pose a danger to anyone who contacts them. To ensure that the advice you receive is genuinely in your best interests, it’s vital to check that any insolvency advisor or practitioner you may approach is registered and fully regulated.
If you want to give me a call, I’ll be happy to discuss what you should be looking for and point you to where you can find firms that will have your best interests at heart.