IVA levels ‘set to hit record’

This year will see the number of personal insolvencies in the UK hitting a record high, it has been predicted.

Such a forecast has come from accountancy firm RSM Tenon, which also noted there had been a 19 per cent dip in such occurrences in 2010, with individual voluntary arrangements (IVAs) overtaking bankruptcy as the most common form of insolvency.

That fall, however, will not be repeated this year as an unprecedented 140,000 cases will occur, the company has projected.

RSM Tenon’s head of bankruptcy and personal insolvency Mark Sands said the usual problems of pre-Christmas credit card debt and other overspending will be one reason for this.

He added: “This combined with increasing inflation, gas and oil prices, the rise in VAT, public sector cuts and interest rates which can only go up, [means] we believe the rest of 2011 and into 2012 will be a struggle for many.”

IVAs outnumbered bankruptcies by 11,800 to 10,700 in the final three months of last year, Mr Sands noted.

This could mean 2011 will see more IVAs than ever before and those taking them out may find it is a better option than bankruptcy because it comes without the same level of stigma and can be kept confidential, while the damage to credit ratings is not as severe.

On the basis of the RSM Tenon figures, IVAs may be the chief reason for £20.1 million of debt being written off every day by banks and building societies, a figure revealed by debt charity Credit Action earlier this week.

By James Francis