Number of IVAs reached highest quarter total on record

A release from the Insolvency Service has shown that the number of people becoming insolvent in England and Wales has reached the highest levels since 2012. There were 27,388 individual insolvencies in Q1 2018, which is 8.5% higher than in the same quarter the previous year.

In the 12 months ending Q1 2018, the rate of insolvency was 21.8 per 10,000 adults (or 1 in 458 adults).

Whilst the 9% year on year rise in the number of IVAs appears steep, it is in line with other forms of insolvency, such as bankruptcy and Debt Relief Orders (DRO’s), which increased by 9% and 7% respectively.

The rise in insolvencies comes amid concerns raised by the Bank of England (BoE) over the increasing amount of consumer borrowing, which recently reached record levels.  However after intervention from the Bank of England figures show the availability of unsecured loans to consumers in the first quarter of this year dropped by the largest amount seen since records began in 2007.

An individual becomes insolvent when they can no longer meet their financial obligations to lenders. IVA’s are a legally binding agreement between a borrower and creditor about how much money can be reasonably paid back each month after living costs have been taken into account and are often seen as the preferred insolvency choice in comparison to filing for bankruptcy.

David Rodger, CEO of Debt Advice Foundation said of the statistics;  

“The rise in personal insolvencies is greatly concerning.

“Whilst there has been welcome release of pressure on household finances in the first quarter of 2018 with inflation falling to its lowest level in a year, this has followed hot on the heels of two years of price increases for UK households.

“This, coupled with the fact that consumer borrowing has now reached record levels has resulted in the highest number of insolvencies since 2012.

 “We would encourage anyone that is experiencing financial difficulties to call the charity’s free helpline and speak to one of our qualified advisers.”