Trends in bankruptcy—are IVAs here to stay?

Trends in bankruptcy—are IVAs here to stay?
Recent statistics from the Insolvency Service show that the number of corporate insolvencies has continued to decline, but what do the figures tell us about the future of personal insolvencies in England and Wales? Stephen Leslie, a senior associate in the restructuring and insolvency team at Shoosmiths LLP, considers the issue.

Original news

Press Release: Official statistics on insolvencies in England and Wales for the period April to June 2014

While company liquidations have decreased, the number of people who became insolvent in England and Wales increased when compared with April to June 2013. This has been attributed to an increase of one-fifth in the number of individual voluntary arrangements, while the number of bankruptcies and debt relief orders decreased.

So does that mean that more people are now going bankrupt?

Put simply, no. The number of bankruptcies decreased from Q1 2014, and were down 15.9% on Q2 2013. The number of debt relief orders (DROs) increased nearly 7% from Q1 2014, but was still 1.8% down from Q2 2013.

That, therefore, leaves individual voluntary arrangements (IVAs), which saw an increase of 14.6% on Q1 2014, and are up 20.3% on Q2 2013. These increases were sufficient to increase the overall number of people who have become insolvent.

The increase of 20.3% in the number of IVAs from Q2 2013 is represented by 2,455 IVAs. The total number of IVAs in Q2 2014 (14,571) was the highest number of any quarter since they were introduced in 1987.

So why have the number of IVAs increased?

What the statistics do not say is whether the number of IVA proposals put forward by debtors has increased, or whether the rate of approval of IVA proposals has increased, or both.

There have been no recent material changes in law regarding the process of a debtor entering into an IVA, and so that cannot be a reason

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