Search

IVAs up 30 percent in surge of personal insolvencies

Personal insolvencies in the third quarter of 2016 jumped nearly 20 percent, year-on-year.

LinkedIn Twitter

This figure was not exposed to a great deal of public debate last month when the official statistics from the Insolvency Service were released.

 

The number marks an increase of six percent on the second quarter of 2016, but the news was submerged in the Brexit judgment furore and the Bank of England’s more optimistic growth forecast for next year

 

A certain level of increase would have been reasonably expected, given the online adjudicator process for bankruptcies, fee rises for creditors and a change to the threshold for debt relief orders (DROs).

 

But it’s not clear if this explains completely a near 20 percent year annual rise in the third quarter – or indeed five consecutive quarters of increases.

 

A total of 24,251 people become insolvent in the three months up to the end of September, a factor the Insolvency Service said was driven by a rise in individual voluntary arrangements (IVAs), which came out at 13,917. This more than was 10 percent higher on the previous three months and almost 30 percent more year-on-year.

 

Bankruptcies made on the petition or application of the debtor were also up, reaching 2,988 cases. This was 12 percent higher than the previous quarter.

 

The option of avoiding court and going through the bankruptcy process online, thereby removing the ‘embarrassment factor’, seems to have been a preferential one for debtors. The fact they can also pay the application costs in instalments, when petitioning for their own bankruptcy, has probably played a part too.

 

Paul Rouse is partner in the National Creditor Services division at Mazars, which has taken on the highest number of bankruptcy appointments this year, as the table opposite shows.

 

He said: “Access to bankruptcy by individuals seeking a solution has been facilitated by the online adjudicator process, which seems to be popular and working well, rather than having to petition for bankruptcy through the court, which was expensive and potentially daunting for the individual.”

 

Rouse also explained that a different pattern may emerge in the number of creditors’ petitions for bankruptcies.

 

“The increases in fees that the official receiver charges, for every bankruptcy since the end of July, might well deter more creditors seeking recovery through a bankruptcy petition.

 

“This, coupled with the decrease in creditor petitions, due to the inflated £5,000 threshold putting the process out of the reach of many creditors, will most likely see bankruptcy numbers remain flat at best.”

 

There were 870 creditor petition bankruptcies between July and September, which was 3.7 percent lower than the previous quarter and 22.6 percent year-on-year.

 

The Insolvency Service also said this recent drop is linked to a change in the minimum debt a creditor must be owed to make someone bankrupt, which increased from £750 to £5,000 in October 2015.

 

See Credit Strategy’s December issue for the full article.

LinkedIn Twitter
YOU MIGHT ALSO LIKE

Arrow Global announces servicer acquisition and Oaktree partnership

Debt purchaser Arrow Global has agreed terms to acquire Mars Capital UK and Ireland, a mortgage servicer, and secured a partnership with a global asset management firm

Revealed: The Utilities & Telecoms Awards shortlist 2017

Credit Strategy can today reveal the shortlist for the Utilities & Telecoms (U&T) Awards 2017, as the scheme enters its seventh year with Capita as headline sponsor
LATEST IN ANALYSIS

The CS Interview

Renaissance man
LinkedIn Twitter

Renaissance man

Features

Engineering a self-service solution in car finance
LinkedIn Twitter

Engineering a self-service solution in car finance

Opinion

"It’s up to the financial services industry to help teach students the necessary skills to manage their finances"
LinkedIn Twitter

"It’s up to the financial services industry to help teach students the necessary skills to manage their finances"

Dispatches

Lloyds results reveal £2bn of debt in forbearance
LinkedIn Twitter

Lloyds results reveal £2bn of debt in forbearance

Credit Strategy

Did you find our website useful?

Thank you for your input

Thank you for your feedback

creditstrategy.co.uk – an online news and information service for the UK’s commercial and consumer credit industry. creditstrategy.co.uk is published by Shard Financial Media Limited, registered in England & Wales as 5481132, Axe & Bottle Court, 70 Newcomen St, London, SE1 1YT. All rights reserved. Credit Strategy is committed to diversity in the workplace.
@ Copyright Shard Media Group