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IVAs Drive Personal Insolvencies to Seven-Year High

IVAs Drive Personal Insolvencies to Seven-Year High

The number of people who became insolvent after failing to pay their debts increased 16% in 2018.

The increase was driven by a record number of Individual Voluntary Arrangements (IVAs), which help people get a handle on their debts without filing for bankruptcy.

A total of 115,299 people failed to repay debts and entered insolvency in 2018.

The 16% year on year increase in personal insolvencies is the third in a row and the highest rise since 2011.

Bankruptcies increased by almost 10% to 16,582, but by far the biggest increase was in the number of IVAs.

The number of people taking on IVAs increased by almost 20% to 71,034.

Supervised by a Licensed Insolvency Practitioner, an IVA is an agreement between an individual and their creditors to pay back some or all of what is owed over a fixed period.

The arrangement needs to be agreed by 75% or more of qualifying creditors. But if it is agreed then the IVA is binding on all qualifying creditors and they must not make contact or chase up debts.

IVAs only cover certain types of debt including overdrafts, unsecured loans, credit card debt and HMRC debt. They can not be used to cover priority debts like mortgages and secured loans, rent arrears, student loans, child maintenance payments and council tax.

When approached, a Licensed Insolvency Practitioner will work out what an individual can afford to pay back each month over a fixed period (usually five or six years). In doing so, they will take into account priority debts and other costs of living.

They will then send an arrangement proposal to the creditors and ask them to approve the plan.

Tom Fox, Licensed Insolvency Practitioner at Umbrella Insolvency said: “These figures show that more people are getting serious about tackling their debt problems.

“We have seen more aggressive marketing from IVA providers and even celebrities like Katie Price taking on IVAs. This has increased public awareness of insolvency solutions and letting people know that there is a way out of debt misery.”

Find out more about IVAs

For personal debt advice speak confidentially to a member of the team today call 0800 611 8888 or visit www.umbrella.uk