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Personal insolvency dip in Q1 driven by falling IVAs – Insolvency Service

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  • 30/04/2019
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Personal insolvency dip in Q1 driven by falling IVAs – Insolvency Service
Total individual insolvencies fell 8.1% to 31,527 in Q1 this year from an eight year high in Q4 2018 when they stood at 34,287, data showed.

 

However, personal insolvencies are up 16 per cent year-on-year and Individual Voluntary Arrangements (IVAs) have risen 24 per cent in the same period, according to the latest Insolvency Service statistics.

However, in Q1 2019 there were 20,325 IVAs, a decrease of 11.4% compared to a record high in Q4 2018, recording the highest quarterly level of IVAs since their introduction in 1987.

Debt relief orders (DROs) fell by 1.6% in the first quarter to 7,040 from 7,156 in Q4 2018, whilst bankruptcies dropped slightly this quarter by 0.6% to 4,162 from 4,188 in the previous quarter.

This was the first quarter-on-quarter fall in DROs for almost two years. Compared to the same quarter last year, bankruptcies were broadly flat while DROs increased by 6.5%.

IVAs accounted for 64.5% of total individual insolvencies followed by DROs at 22.3% and bankruptcies at 13.2%. Since Q3 2011, IVAs have been the most common individual insolvency while bankruptcies fell after the introduction of DROs in 2009.

 

Bankruptcies

When looking at the different types of bankruptcy, creditors’ petitions and debtors’ applications were both broadly flat compared to the previous quarter.

In Q1 2019, 3,357 bankruptcies were made on the application of the debtor. This was 0.1% higher than the previous quarter and 5.4% higher than in Q1 2018. This form of bankruptcy has been on an increasing trend since 2016.

 

Government plans will take effect by the end of 2019

Richard Haymes, financial difficulties expert at Equifax, calls for broader regulatory action on personal insolvency and debt.

He said that the drivers for the general trend of rising insolvencies, such as soaring credit card debt, now £2,649 per household, economic stagnation and the problematic roll out of Universal Credit remain, but other industry developments are directly impacting volumes, such as the re-emergence of a number of historic major players offering IVAs.

He added: “These companies, which also offer debt management services, have transformed their businesses following the first FCA thematic review in 2015. Having met the regulatory requirements, they are once again in growth mode.

“While the government has positive plans in place, such as formalising Breathing Space and the consultation on Statutory Debt Repayment Plans, these won’t take effect until at least the end of this year. Facing potential headwinds from Brexit and wider economic conditions, the financial situation for many individuals and families is likely to worsen.”

 

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