The Rise and Rise of the IVA – 50,000 case barrier set to be broken

Statistics released today (29 October 2014) by the Government’s Insolvency Service show that this year will almost certainly be a record year for Individual Voluntary Arrangements (IVAs) – Britain’s most popular method for people to deal with unaffordable debt.

IVAs as % of all personal insolvencies

The IVA, which freezes interest and charges and writes off large amounts of debt (when the arrangement is completed) has been the most used personal insolvency procedure in England and Wales since the second quarter of 2011 and has now accounted for more than half of all personal insolvencies for six consecutive quarters. It’s highly likely that IVAs will account for the majority of personal insolvencies over 2014 as a whole.

This year there have already (to the end of September) been 40,349 IVAs. It looks likely that the October to December quarter will see between 11,500 and 16,000 IVAs – meaning the 50,000 case barrier is almost certain to be broken for the first time.

Here at ClearDebt we believe the rise in IVAs is due to a number of factors:

  • It’s now possible, where appropriate, to arrange an IVA at much lower levels of debt and income than it was a few years ago.
  • Free-to-client debt advisors may be recommending more IVAs compared with the less certain and usually more lengthy Debt Management Plan.
  • People are more familiar with the IVA process, which is a genuine attempt to repay debt affordably and is thus less stigmatised than other solutions.

The last major rise in IVA numbers (2004 – 2006) may have been partly caused by the growth in the number of IVA providers and considerable advertising spend raising public awareness of the procedure, but regulation of the sector has become tighter and tighter in recent years and marketing spends have been slashed – so this is unlikely to be the reason for the current sustained growth in IVA numbers.

The rise of the IVA has taken place against a background of decreasing personal insolvencies, as the UK economy recovers.

Bankruptcy numbers have declined for the last four years (to 2013) and look set to drop further in 2014. Debt Relief Orders dropped in number in 2013 and seem likely to stay at a similar level (27,000 – 28,000) in 2014.

We don’t believe IVA numbers will drop any time soon – four out of five UK consumers with debt problems aren’t taking steps to deal with them. When they do decide to take steps it’s likely that the IVA will often be the most appropriate – and certain – solution.

Notes on the data

Statistics in this article are taken from (or based on) the Insolvency Service’s Insolvency Statistics: July to September 2014

 

 

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