IVAs continue steady rise over last quarter

New monthly statistics from the government agency don’t paint a clear picture on the impact of the pandemic on personal insolvency trends, due mainly to volatility in how IVAs are registered and one-off technical issues in how they were reported.

They do show however that 7,899 IVAs were registered, on average, each month during the quarter ending May 2020. This was an 11 percent increase on the same period last year.

IVAs were registered as an average over three months, rather than just for May, due to one-off technical issues* that would have skewed recording them as monthly.

The data also shows there were 1,540 debt relief orders (DROs) in May throughout England and Wales – a fall of 32 percent on a year ago.

Bankruptcies, at 739, (comprising 690 debtor bankruptcies and 49 creditor bankruptcies) fell just under 50 percent compared with May 2019. Delving further into the figures, there was a 40 percent fall in debtor bankruptcies and an 83 percent reduction in creditor bankruptcies.

Christina Fitzgerald, vice president of insolvency and restructuring trade body R3, said the overall insolvency stats don’t yet reflect the impact of the pandemic.

She added: "On the consumer side of things, debt repayments have actually increased since lockdown, but research is also showing that some people are falling behind on paying rent, bills and mortgages, which is definitely cause for concern.

“The longer lockdown continues, the more damage the economy will sustain. Yet easing restrictions on trading prematurely could lead to a wave of new infections and an even greater danger to business and personal finances. The government has a difficult job in balancing these considerations as it plots a path forward."

As for the data as it stands, the Insolvency Service said the fall in DROs and debtor bankruptcies corresponds with a reduction in applications for these services, which coincided with the announcement of enhanced government financial support for individuals during the pandemic.

The Insolvency Service also explained that a fall in creditor bankruptcies will likely have been a result of reduced HMRC enforcement activity during this period and in part, a result of reduced operational running of the courts during this time.

* The Insolvency Service explained that technical issues when registering IVAs related in part to the time lag from an IVA being accepted and the date it’s registered against an insolvency practitioner. IVA statistics were also affected by technical issues experienced by an IVA provider, with nearly 5,000 IVAs that would have been registered in May 2020, that would otherwise have been registered between December and March.