Debtors Entering IVAs in Record Numbers
January 31, 2020
People with serious debt problems are entering Individual Voluntary Arrangements (IVAs) in record numbers, according to the latest official figures from the Insolvency Service.
Almost 78,000 IVAs were entered into across England and Wales over the course of 2019, which represents a 10 per cent increase compared with the previous year.
IVAs are a form of insolvency that give people with debts running into tens of thousands of pounds a chance to establish a repayment programme that allows them to work steadily towards becoming debt free.
There was a 6 per cent jump in individual insolvency rates overall last year, with the heightened use of IVAs the main contributor to that increase.
Between 2010 and 2019 there was a sharp rise in the number of people entering IVAs, with the annual figure at the beginning of the decade at around 50,000, compared to the 77,973 recorded for 2019.
Typically, an IVA is designed to remain in place for several years, giving debtors a chance to gradually pay off their debts without being pursued by creditors.
The idea is that individuals agree with specific terms that should then be affordable for them and they make a single payment each month that is automatically distributed between their creditors.
Entering an IVA requires the support of licensed insolvency practitioners who help to establish the basic terms of a debt repayment plan between someone who’s insolvent and the organisations or service providers they owe money to.
However, the debt help charity StepChange has raised concerns that, while IVAs are clearly the right debt solutions for a lot of people, a certain proportion are finding it impossible to stick to the repayment terms they agree to, which can create problems for them down the line.
Reflecting on the circumstances that have led to steep increases in the number of IVAs being entered, Duncan Swift from the insolvency trade body R3 noted that while employment rates are generally high across the UK a lot of people are still finding themselves severely stretched.
“Financial resilience is low,” he said. “It doesn’t take much of a shock – a missed benefit payment, an unexpected bill, or a reduction in hours – to cause financial problems.”
“Individuals have benefited from low inflation, real wage increases, and record employment levels, but this has been counter-balanced by rising consumer debt and the fact that not all employment is secure.”