Figures published today by the Insolvency Service indicate that the total number of people who became insolvent in England and Wales decreased for the fourth year in succession. This is also the lowest annual total since 2005. Good news!
The rate of insolvency also decreased with 1 in 455 adults becoming insolvent. This is the lowest rate since 2006.
However, the proportion of those in debt who chose an Individual Voluntary Arrangement (IVA) as their preferred solution, increased. Harrington Brooks IVA team, have received feedback that suggests IVAs are increasingly more popular, especially for those managing higher levels of debt, because of the more formal framework which exists around their plan. The prospect of being protected from creditors and eventually being debt free is welcoming.
Harrington Brooks IVA customers see a 5 to 6 year commitment, with a set monthly budgetary contribution as making it easier to managing their debt. It’s easier to follow and allows them to continue to run a busy life despite the adverse effect being on an IVA can have on their credit rating.
Other advantages, often quoted are that being on an IVA helps customers safeguard their property and the affects of bankruptcy, which is still perceived as carrying a social stigma.
Of course customers do sacrifice certain long term plans and any new or further commitments to spending and credit, and realise that the cost of future lending may also be increased.
The number of IVAs was at its highest level since they came in to existence in 1987. There were 52,190 IVAs in 2014, which was a 6.8% increase on 2013.
Debt Relief Orders (DROs) also fell by 3.1% compared to the year before. There were 26,688 DROs in 2014, which was a 3.1% decrease on last year. This trend may change however from 1st October 2015, with the advent of the recent announcement about changes to the thresholds and qualifying terms for DROs.
The trends around company insolvencies also following similar trends to those measuring personal insolvencies with the number of companies that fell in to administration during 2014, also falling by 24% compared to 2013.
Insolvencies in England and Wales for 2014 fell by almost 2% compared to 2013.