Individual insolvencies reached a nine-year high in 2019, driven by a record number of individual voluntary arrangements (IVAs).
According to new government data, there were 122,181 individual insolvencies in 2019 – a year-on-year increase of six per cent, and the highest level since 2010.
More than 63 per cent of these insolvencies were carried out via IVAs. By comparison, in 2010, 37.5 per cent of individual insolvencies were the result of IVAs.
Furthermore, the data found that the number of IVAs failing within their first year has increased to 8.4 per cent – the highest percentage since 2002. The two-year failure rate hit a 12-year high of 19.4 per cent, while the three-year failure rate was the highest since 2009, at 25.1 per cent.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, warned that while IVAs are a valuable alternative to bankruptcy, they are not right for everyone and there is a risk that people in debt could be picking the wrong option.
“One worrying sign is that a quarter of people who go into an IVA have failed to keep up their repayments by the time the deal is three years old – the highest proportion in a decade,” said Coles.
“IVAs have expanded partly because of the explosion of the availability of credit, but also because the industry has spent enormous sums of money on advertising and sales. The top four companies account for over half of IVAs – showing the power of this advertising.
“The issue is that people with problem debt who hear about IVAs may opt for one without properly exploring the alternatives.”
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