Insolvencies fall as the banks get tough
The number of people taking out individual voluntary arrangements (IVAs) to escape their debts has fallen in recent months, according to accountants PricewaterhouseCoopers (PwC).
IVAs are voluntary deals between debtors and creditors overseen by an insolvency practitioner, and represent a saving and investment for the debtor.
The amount the debtor owes is cut and they then have to pay off the remainder over a set number of years. IVAs are seen as preferable to bankruptcy as there is less chance of the debtor having to sell their home to satisfy their creditors.
Pat Boyden, an insolvency specialist at PwC said: “Our indications are that month on month IVA numbers have been falling gradually. The total amount of personal debt seems to be stabilising after booming in the first five years of the new century.”
Although personal loans increased again last year, the amount owed on credit cards fell as their use declined for the first time since they were introduced in 1966, as people decided more in favour of saving and investment rather than spending.
Figures from the Government’s Insolvency Service showed that there was a 60% rise in personal insolvencies in 2006, although Boyden said that “this seems to be tailing off now”.
Another reason for the decline is that the many of the banks are refusing IVAs, as they believe a proportion of the people using them could afford to repay more of what they owe.