On 30 April the Insolvency Service published the personal insolvency statistics for the first quarter of 2019.
Comparing this quarter to the last quarter of 2018:
- bankruptcy and DRO numbers were about the same;
- IVA numbers dropped from 22,943 in Q4 2018 to 20,325 in Q1 2019.
The upward trend of IVAs continues
It is a mistake to make too much of this fall in IVA numbers, because the overall trend is still up.
Q3 and Q4 IVA numbers last year were both very odd, as the following graph show.:
The detailed figures for the last 5 quarters are here:
| all | bankruptcies | DROs | IVAs | |
| Q1 18 | 27,194 | 4,148 | 6,610 | 16,437 |
| Q2 18 | 28,685 | 4,098 | 6,922 | 17,665 |
| Q3 18 | 25,153 | 4,168 | 6,995 | 13,989 |
| Q4 18 | 34,287 | 4,188 | 7,156 | 22,943 |
| Q1 19 | 31,527 | 4,162 | 7,040 | 20,325 |
The numbers in pink show the odd 2 quarters: Q3 IVA numbers were way down, Q4 numbers sky high.
And there was no significant change in DROs or bankruptcies in those two quarters, so this seemed to be a purely IVA oddity, not related to any change in the wider economy and people more or less likely to choose insolvency.
In IVAs in 2018 – numbers jump and so do failure rates, I speculated:
It looks to me as though some IVAs that would normally have gone through in Q3 were for some reason delayed until Q4, giving a big bulge at the end of the year.
One explanation for this could be the reports on some IVA forums during the summer that one of the big IVA firms was having a lot of its creditor meetings to accept IVA proposals adjourned or postponed because of “paperwork problems”, which were never clearly identified. These stories dried up during the autumn. If this had affected several thousand IVAs, which were approved a few months later, that could account for the Q3 and the Q4 statistics.
I think the new Q1 IVA statistics show this was probably a correct interpretation.
IVA numbers have now returned to where they would have been if IVAs had gone up steadily by about a thousand a quarter for the last 5 quarters: 16,400 – 17,400 – 18,400 – 19,400 – 20,400.
Back to the old question – why are IVA numbers rising?
Why should IVAs have gone up 24% this quarter from the same quarter last year? At a time when bankruptcies are flat and DROs have only gone up 7%?
For two years now I have been saying that IVA numbers have been rising much faster than the other forms of personal insolvency because significant numbers of IVAs are being mis-sold to people who would have been better advised to choose a DRO or bankruptcy.
The fact that the January statistics showed IVA failure rates in the early years are also increasing supports this suggestion – someone who should have had a DRO is very likely to struggle in an IVA.
In September last year the Insolvency Service’s Review of the monitoring and regulation of insolvency practitioners report picked up many points on this area. The FCA’s Dear CEO letter to Debt Packagers a few weeks later addressed the allied problem of ensuring that customers who were referred to IVA firms had been given good advice on their options.
But neither of these useful-sounding reports seems to have made any difference so far. The Insolvency Service and the FCA need to be concerned and see what practical actions they can take.
Data would help people choose an IVA firm
IVA firms want to make bankruptcy sound scary
A couple may need different debts options
Suzanna Walker says
The Insolvency Service have carried put various independent surveys about bankruptcy and over 43% of those interviewed thought that there was stigma attached to being bankrupt. One the main reasons they gave for not liking bankruptcy over other options was the fact you don’t pay anything to your creditors. So it seems there is a social conscience. The number of DRO’s are determined by the number of authorised providers, perhaps if that number was increased you may find more DRO’s being approved. As for fluctuations in IVA numbers you can only speculate, seasonal issues, GDPR which meant a whole lot of changes in sharing data there is certainly no evidence whatsoever that the numbers imply miss selling. You cant be miss sold an IVA , it is incorrect advice. It is good that people wish to pay something back to creditors and be free of unsecured debts in a reasonable time period. The only option you have is an IVA until the regulated DMP is launched if you feel the same as the 43% in the survey.
Sara (Debt Camel) says
A good debt adviser should be giving accurate descriptions of bankruptcy and IVAs. See this article https://debtcamel.co.uk/making-bankruptcy-look-scary/
Jane Clack says
I think giving incorrect advice actually leads to IVAs being missold. There is no doubt in my mind that many people who opt for long term debt management plans would be better off looking at IVAs but there are too many benefits only, low surplus IVAs being seen with people who have no assets to protect. Sure, sometimes there will be mistakes, sometimes rogue advisers and sometimes ones that are purely looked at commercially but repairing these mistakes should also be taken into account.
Joe Chapman says
I arranged an IVA for a friend 8 weeks ago, with debts totalling over £25000, aged 78 and no assets. I had originally thought of bankruptcy, as I had gone through that some years ago, but an advisor from Simple Solutions in St Albans, had suggested the IVA was the best way forward. However, because about £5500 of that debt is with Brighthouse, and cannot be included in the IVA (because he cannot afford to hand the goods back), he is still fighting to clear this debt. Or should I say I am still fighting for him!
Currently, I am happy with his IVA, but if any one of the creditors decides to push him into bankruptcy, would he have been better off making a self application for this in the first instance?
Sara (Debt Camel) says
If he has no assets, what is the advantage of an IVA for him?
Joe Chapman says
That is a puzzle to me, as he, and I, had been informed that he would be worse off, and liable to be paying more money out per calendar month through the Trustee in Bankruptcy, and would risk losing his goods, IE TV, Cooker, Fridge and Bedroom furniture. I had felt he would not lose out, but the advisor was insistent that he should not risk it. Eventually, my friend decided to choose the IVA. He was also worried about the stigma of bankruptcy, and this may have been the real reason he opted out of that.
I had tried to reassure him, but felt I should not lead him against his will!
Andrew S says
I would suggest looking into a Debt Relief Order – DRO, as you don’t mention this is something you or your friend have looked into. It may not be suitable, but if your friend is living hand to mouth with pension and benefits it maybe something he can apply for and you may wish to get advice on. Citizens Advice would be a good place to start.
Whilst things may not have gone so well for your friend in life, spending his last few years stressing about money or working like a dog assuming he has some form of employmet, till he has little time left doesn’t seem on either.
Hope the situation improves.
Kate C says
Andrew S – if he has more than £20,000 of debt then he can’t have a DRO, so this isn’t an option for him. If he has enough surplus for an IVA, then it’s likely a DRO would also be unsuitable as you have to have under £50 per month.
Kate C says
Joe – re the TV, Cooker, Fridge and Bedroom furniture – if these are the items with Brighthouse, then it’s often worth looking into whether they would actually take the goods back when a customer defaults. If Brighthouse customers have items which are essentials – which I would argue the cooker and fridge are – then Brighthouse do sometimes allow the customer to keep the goods, even if they stop payments.