Are IVAs cannibalising Debt Management Plans?

Individual Voluntary Arrangements (IVAs) maintain their position as the most used personal insolvency procedure according to the latest Insolvency Service Statistics. But are IVAs cannibalising other forms of personal insolvency and debt management plans?

Individual Voluntary Arrangements (IVAs) maintain their position as the most used personal insolvency procedure according to the latest Insolvency Service Statistics.

The statistics prove interesting reading and further support our thoughts when we last posted about the figures in February.

IVAs are now at their highest level ever

More than half of all personal insolvency procedures in April-June this year were IVAs. IVAs have now accounted for over 50% of all personal insolvencies for the last four quarters and have been the most used personal insolvency procedure since 2011.

Looking at the graph below you can see a slight increase in Debt Relief Orders (DROs) compared to Q1. Bankruptcy Orders have further decreased after a slight peak in Q1 but the gap between them and IVAs widens.

Personal Insolvencies in England & Wales
Personal Insolvencies in England & Wales
Figures by The Insolvency Service

Could IVAs be set to take off?

IVAs are available to people whose debt levels are below those available in DROs (£15,000) and more and more people understand how much more certain an IVA is (and less costly) than a Debt Management Plan, even from a free provider.

We would be surprised if the number of IVAs didn’t keep on growing.

Could IVAs reach the giddy heights of 20,000 per quarter?

We think that this is unlikely, given that the overall trend in all personal insolvencies is still down, but we are confident that more and more people with debt problems will recognise the IVA as the right solution for them.

At that moment, surely, the only way is up.

Are all personal insolvencies on the rise?

IVA usage increased by 20.3% compared to the same period in 2013, with 14,571 IVAs registered between April and June this year. The figures show that 1 in 440 have become insolvent in the last year, which is up from 1 in 144.

Both Bankruptcy and DROs continued to decline compared to the same period last year and, overall, the trend in personal insolvency is still down.

Insolvency Statistics Infographic April-June 2014
Insolvency Statistics Infographic April-June 2014

Much more than just an IVA

An IVA can often be a better and more appropriate solution to dealing with debt and at ClearDebt we make them more accessible to people with much lower levels of debt and incomes.

Is it any surprise people look to an IVA to help them become debt free in 5 years? With interests frozen and a portion of the unaffordable debt written off at the end of the arrangement, you can see why it is a preferred option.

At ClearDebt, we have seen an increase in IVAs being arranged for people who can only afford to pay less that £100 per month.

The figures suggest that even though Debt Management Plans are considered the right choice for people in debt, you can’t ignore the evidence that IVAs are becoming an evermore important solution for personal debt.

Have your say

Are IVAs cannibalising other forms of personal insolvency and Debt Management Plans?

Tell us what you think in the comments section below.

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Comments:1

  1. The long term trend for IVAs really is up (37% of personal insolvencies five years ago – 54% now). It could be a tipping point. There are thousands of people out there in free or fee debt management plans who’d be better of in an IVA and probably 4 times as many again who don’t even know they should be doing something about their debt and that an IVA will work for them.

    The long term trend for personal insolvencies is still down (135k in 20101 – 101k in 2013). Across all procedures there could be a slight upward bump this year (103k?) but it’s going to look pretty flat really.

    But it’s a different story for IVAs. Do as many in the next six months as in the last six and it’ll be the biggest year for IVAs ever (54-55k) outpacing 2010’s 50k+.

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