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Record rise in Individual Voluntary Arrangements (IVAs)

Monday, 29th January 2018

The number of people who became insolvent in England and Wales in 2017 was 99,196, a 9.4% rise on 2016 and returning to the level observed in 2013 and 2014 reports The Insolvency Service.

Individual Voluntary Arrangements (IVAs)

There were 59,220 Individual Voluntary Arrangements (IVAs) in 2017, an increase of 19.8% on 2016 and the highest annual level recorded.

An IVA is a legally binding agreement between a consumer and his or her creditors, usually store and credit cards, bank loans and overdrafts and is supervised by an insolvency practitioner. With an IVA you have more control over your assets and are less likely to lose your home, but it involves paying some of your debts usually over a period of five years and any remaining debts left in the IVA will be written off. Read more on Individual Voluntary Arrangement (IVA) Information / Advice 

The impact of Debt Relief Orders (DROs) on bankruptcy numbers

There were 24,894 DROs in 2017, which was a decrease of 5.0% compared with 2016.

Debt Relief Orders were introduced in 2009 and are another form of insolvency for those who have unsecured debts below £20,000, not a house owner, assets below £1,000 and under £50 pcm in disposable income. Those who propose a DRO do not pay anything towards their debts other than the admin fee of £90 and if their circumstances do not change after one year from the commencement of the DRO they are debt free. read more Debt Relief Orders (DROs).

Those consumers that qualify for a DRO would find this a more attractive scenario than the normal bankruptcy process. For the first time, in 2013, there were more DROs than bankruptcies.

The falling consumer bankruptcy numbers

There were 15,082 bankruptcy orders in 2017, a 0.3% increase on 2016. Orders on the application or petition of the debtor increased by 5.9%, while those on the petition of the creditor fell 15.8%.

This is the second lowest number since 1990 when there were just 13,987. Whilst some debt advisors believe the high cost to the consumer in England and Wales to go bankrupt is a major factor the introduction of debt relief orders (DROs) in 2009 is likely to have affected the numbers. Another point is the recent change in the amount the debtor must owe before a creditor can petition, this has now risen from £750 to £5,000. Read more consumer bankruptcy and how to apply on line

Note in the table below the numbers going bankrupt in 2009 compared to 2010 - 2017.

The most common insolvency procedure for consumers?

Of the 99,196 people who became insolvent in 2017, 59.7% had IVAs, 25.1% had DROs and 15.2% had bankruptcy orders. In 2016 IVAs comprised 55% of all individual insolvencies, compared to 50% in 2015 and 53% in 2014.

The cost to go bankrupt England v Scotland

In 2009 the cost to petition for bankruptcy in England was £495, this increased by 37% in 2010 and as from 21 July 2016, this has increased further to £680. Meanwhile in Scotland it is just £200.

The fall in bankruptcy numbers after the 2010 increase in fees

Note in the table below that in 2009 (the year before the increase in fees) the number of those going bankrupt was close to 75,000 and that the numbers for 2016, 2017 and 2018 average 15,000. 

 

Year Total Bankruptcies IVAs DROs
2009 134,142 74,670 47,641 1,831
2010 135,089 59,194 50,716 25,179
2011 119,943 41,876 49,058 29,009
2012 109,640 31,787 46,674 31,179
2013 100,998 24,571 48,881 27,546*
2014   99,223 20,345 52,190 26,688
2015   80,404 15,845 40,384 24,175
2016**   90,657 15,044 49,417 26,196
2017**   99,196 15,052 59,220 24,894


* For the first time, in 2013, there were more DROs than bankruptcies. ** Figures for the whole of 2017.

We have a full list of all the consumer insolvencies since records began back in 1960, you can view them here Insolvency figures since 1960

Duncan Swift, deputy vice-president of insolvency and restructuring trade body R3, says:

“With so much uncertainty in the air, it’s really important that anyone who is struggling with their debts, or who feels their financial situation is precarious, should seek help and advice from a qualified and regulated source. Government plans to introduce a short ‘breathing space for seriously indebted individuals are welcome, but it will take several years to actually implement. That will be too late for many.

“With personal insolvencies it’s always worth noting that the official statistics don’t tell the full story: there is a lot of ‘hidden’ insolvency out there. There are potentially tens of thousands of people in non-statutory debt management plans. Although these plans are regulated by the FCA, there is no record of exactly how many there are. This makes it impossible to grasp the full scale of serious indebtedness.” Full comment from R3 can be found here

Source for numbers above www.insolvency.gov.uk

 

 

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