During 2017 the number of people starting an IVA increased nearly 20% compared to 2016. It was the highest annual level of IVAs ever recorded.
- IVA Statistics table
- Number of people starting an IVA up 20%
- Why are more people using IVAs?
- Are personal debt problems are rising?
Overall the total number of people declaring themselves insolvent (including Bankruptcy and DRO) increased by 10% to approximately 99,000 in 2017 from around 90,000 in 2016.
IVA Statistics Table
|Qtr 1||Qtr 2||Qtr 3||Qtr 4||Total|
Source: The Insolvency Service Official Statistics (Not Seasonally Adjusted)
Number of people starting an IVA up 20%
The number of people starting an IVA has been rising since the beginning of 2016. 2017 saw the highest number ever recorded. A 20% increase over the previous year.
It would be easy to point to this growth as an indication that personal debt problems in the UK are significantly increasing. However during the same period the number of individuals going bankrupt actually stayed the same.
Given this other explanations should be considered. One of these is the significant switch in business focus of many debt management companies in the past few years away from Debt Management Plans to IVAs.
Why are more people using IVAs?
Since April 2014 the debt management regulatory regime has changed significantly. In particular the FCA (Financial Conduct Authority) has increased regulation surrounding the provision of the Debt Management Plan solution.
To avoid this a number of providers have changed their business model away from DMPs. Instead they are now concentrating on marketing IVAs which remain outside the FCA regulatory regime. As a result more people have started an IVA rather than a DMP.
This is not necessarily a bad thing. One of the advantages of an IVA over a DMP is that the payments last for a fixed period of 5 years. However an IVA is not suitable for everyone. Arguably some people are being “sold” the IVA solution where they would be better off going Bankrupt.
Anecdotal evidence suggests many people who have started an IVA in the past 2 years would otherwise have started a DMP.
Are Personal Debt Problems are Rising?
It is difficult to say whether the number of people struggling with debt in England & Wales is on the increase. Despite the increase in the number of IVAs the number going bankrupt is static.
Arguably recent growth in IVAs is just people who would otherwise have started a DMP. As such the overall number of people with debt problems may not have changed. However there are signs that the numbers are starting to rise.
The number of formally recorded insolvent individuals has risen by 20% over the past 3 years from just over 80,000 in 2015 to just under 100,000 in 2017.
If inflation continues to outstrip wage growth and interest rates continue to rise the number of people struggling with debt will increase.