IVAs hit an all-time high

The Insolvency Statistics today show some 99,196 personal insolvencies were recorded in 2014, which is the first time the total has dropped below 100,000 since 2005.

This represents a 1.8% fall in personal insolvencies compared to 2013, the lowest it has been for nine years. IVAs however have risen to record heights while bankruptcies and Debt Relief Orders continue to decline.

ClearDebt’s IVA prediction correct

We predicted 2014 would be a record year for IVAs with them rising above the 50K mark. There were 52,190 IVAs arranged in 2014 – a 6.8% increase compared to 2013.

Personal Insolvency Stats 2014
Statistics in this article are taken from the Insolvency Statistics: October to December 2014.

IVAs have continued to rise in a trend where personal insolvencies as a whole are in decline. The figures show a 17.3% drop in bankruptcies compared to 2013 and a 3.1% drop in Debt Relief Orders when compared to the same period.

Louise Brittain, Council Member of the insolvency trade body R3, commented on the statistics. She said:

This year has seen the continuation of the trend of falling bankruptcies and Debt Relief Orders. Individual Voluntary Arrangements are now firmly the dominant form of personal insolvency.

Our prediction for IVAs in 2014 was 53,649, which was a slight over–estimation, but not far off. We ran a competition to ask individuals what they thought the total would be; which resulted in around 40% of responders guessing between 52-53K IVAs in total for 2014.

Why do we think IVAs have hit a record high? IVAs are an affordable, achievable solution for resolving an individual’s debts and are a great compromise between the interests of debtor and creditor.

Are IVAs still cannibalising Debt Management Plans? The figures for Debt Management Plans are not known (as no-one currently has this information – but we believe the Financial Conduct Authority might be collecting this information in the future); however we feel that IVAs are eating into Debt Management Plans that are currently Britain’s most common form of debt resolution solution, but that might change in the future.

Our predictions for IVAs in 2015

We believe IVAs will continue to rise but more slowly than in previous years. We predict that they will take off again when the banks relax their lending criteria. This has yet to happen but when it does we think there will be an acceleration in the number of IVAs used within roughly a year to 18 months of the change.

What are your predictions for IVAs in 2015? Leave your comments below.

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