Latest research has shown that more people are avoiding bankruptcy by entering an Individual Voluntary Arrangements (IVA) than ever before say business turnaround advisors at Sheffield’s Wilson Field.
A combination of greater public awareness, spurred on by the upsurge in advertising about different options available, has meant the number of IVAs – where a person comes to a legally-binding arrangement with creditors – has increased fivefold since the 1990s.
Annual statistics published by the Insolvency Service reflect a process which has come to maturity. More people are being given the chance to address money owed, debt problems and be offered a fresh start.
Phil Meekin, from Wilson Field which has offices in Sheffield and across the country, said; “In the years between 1990 and 2003 volumes of IVAs bumbled along at a modest pace – less than 10,000 per annum.
“Between 2004 and 2006 there was a significant increase in the number of IVAs jumping to in excess 40,000. By 2010, this had peaked at over 50,000 and it has hovered just under that figure ever since.
“The sharp rise between 2004 and 2006 perhaps reflects increased awareness by the public of alternatives to bankruptcy when then were facing financial difficulty, which was doubtless helped by an increase in advertising by IVA providers.”
Where the promised repayment terms are not kept, IVAs are terminated. This will often result in the individual facing bankruptcy or a Debt Relief Order.
Phil added; “Whilst the overall percentage of IVAs failing has increased from around 30% during the 1990s it now averages 40%. Despite this, the rate of IVAs which fail within the first two years has decreased when comparing those registered before 2008 with those registered post-2011, which augers well for the future.
“There are many factors affecting these statistics which makes drawing clear conclusions difficult. The impact of economic problems on both consumers and the self-employed, growing levels of awareness and a better informed public and changing attitudes of creditors can all have an influence.
“But perhaps what makes interpreting individual insolvency statistics inconclusive are the missing pieces of the jigsaw – the number of individuals who are in Debt Management Plans and those using the likes of Pay Day Loans.
“As DMPs are informal agreements with creditors, there are no official statistics as they are not classed as insolvency procedures. Similarly, Pay Day Loan facilities often mask or delay the onset of insolvency. Without these we can only guess at the overall picture.”