A record number of people started an IVA in 2014. 52,190 people started the solution. The largest volume of IVA start ups in any one year since the solution was introduced in 1987.
However despite this increase there has been an overall reduction in the total number of people declaring themselves formally insolvent. 2014 saw this number fall to just under 100,000 for the first time since 2005.
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Why are more people using IVAs than other forms of Insolvency?
There are three main personal insolvency solutions in England & Wales. These are the IVA (Individual Voluntary Arrangement); DRO (Debt Relief Order) and Bankruptcy.
During 2014 of the people using these solutions 53% chose to start an IVA. This is up from 48% in 2013 and from 38% in 2010. These figures clearly show that this debt solution is gaining in popularity.
There is a clear reason for this. Since 2012 there has been a significant relaxation of the criteria required to start an IVA. Particularly the minimum amount you must be able to pay towards your debts each month has reduced. In addition the level of unsecured debt required before an IVA is possible has reduced.
A relaxation of the criteria that need to be met to qualify for an IVA has made the solution accessible to many more people.
Is an IVA the best Debt Solution?
Despite the increase in the number of people starting an IVA it is not always the best solution to resolve a debt problem. One of the main alternatives to an IVA is Bankruptcy.
Very often people believe that bankruptcy should be avoided at all costs. However this is not always the case. If you are not a home owner and will struggle to make monthly payments towards your debts it could be far better than an IVA.
Despite this many people are put off going Bankrupt because they simply cannot afford to pay the up front fee. The short term cost prevents rthem from taking up a solution that may be far cheaper for them in the long term.
The fact that there are no up front costs associated with an IVA is a key reason why people start this solution who would otherwise benefit from going Bankrupt.
No One Debt Solution fits All
Of course in an individual case there may be a considerable number of other reasons why an IVA is preferable to going Bankrupt. In these cases anything that makes the solution more accessible such as lower entry criteria are certainly to be welcomed.
Nevertheless when trying to resolve a debt problem one solution certainly does not fit all. Given this the dramatic take up of IVAs over the past few years does seem to be cause for some concern.
Ultimately if you are trying to decide which debt solution to use the best advice is always to take the time to consider all the options carefully. Making the decision to use one solution simply because it seems easier in the short term may mean that you end up struggling with your debts for far longer than you need to.