Sharp rise in bankruptcies and IVAs

New figures from the Insolvency Service show insolvencies in the first quarter were up for both individuals and companies, as bankruptcies and Individual Voluntary Arrangements (IVAs) soared.

Individuals accounted for 23,351 individual insolvencies in England and Wales in the quarter, a staggering 73.4 per cent rise on the same period in 2005.

This included around 15,400 bankruptcies and 8,000 IVAs – with the IVA figures representing a 142 per cent rise on last year’s figures.

In total there were 3,439 company liquidations in England and Wales between January and March, made up of 1,428 compulsory liquidations and just over 2000 creditors voluntary liquidations.

This yielded a 7.6 per cent rise in company insolvencies on the previous quarter overall –up 17 per cent on the same period in 2005.

The compulsory liquidations showed the biggest movement in the corporate sector, rising by nearly 30 per cent on the figures for the previous year.

ClearDebt chief executive David Mond said the figures could even be underestimating the demand for IVAs, as creditors struggle to deal swiftly with the sharp rise in debtors using this avenue.

“Our experience is that even the largest of banks and credit card companies are having difficulty coping with the rise in debtors seeking an IVA,” he commented.

“We noticed a significant slowdown in creditor’s ability to respond to IVA proposals as early as February. By late March we had to take the decision to increase the time we gave to creditor organisations to respond to our proposals from 14 to 21 days.

“As a result, it is likely that there are hundreds or thousands of IVAs in the pipeline, awaiting approval which, ordinarily, would have appeared in the DTI’s statistics.”

Mr Mond’s comments follow ClearDebt’s own study into the state of Britain’s borrowings, with the 14,000-strong survey showing the average IVA seeker now owes 137 per cent of their annual take home pay – compared with 116 per cent in May last year.