Date: 11 December 2013
INDIVIDUAL VOLUNTARY ARRANGEMENTS: OUTCOME STATUS OF NEW CASES REGISTERED BETWEEN 1990 AND 2012, ENGLAND AND WALES
Statistics showing the outcome status of Individual Voluntary Arrangements (IVAs) registered between 1990 and 2012 in England and Wales are published today (11 December) by the Insolvency Service. These statistics, recording the status as at September 2013, are shown in Figure 1 below and Table 1 at the end of the main Release. Data from this release in Excel format here.
Figure 1. Individual Voluntary Arrangements by year of registration and outcome status as at September 2013, England & Wales
Number of registrations
Service, September 2013.
The number of new IVAs registered each year has increased substantially over the period covered, from fewer than 10,000 annually up to 2003, to a peak of over 50,000 in 2010. The upward trend in registrations was particularly steep between the years 2004 and 2006, where there was a more than four-fold increase from 10,725 registrations in 2004 to 44,084 in 2006. The numbers dipped in 2007 and again in 2008, then increased to reach a level of 44,000 to 50,000 per year between 2009 and 2012.
The trend in IVA registrations during the period from 2004 onwards is broadly in line with the pattern for total individual insolvencies (although bankruptcy orders continued to rise to a peak in 2009, and the introduction of debt relief orders has impacted total numbers from 2009 onwards). The rapid increases in new individual insolvency cases from 2004, in particular, are considered to be related to households taking on higher levels of debt from the early 2000s, as well as more general economic factors. Figure 4 at the end of this release shows trends in each type of individual insolvency since 1990.
For IVAs themselves, the rapid increase from 2004 to 2006 coincided with a number of firms setting up as volume providers of IVAs, with attendant advertising of the service on offer. Commentators have suggested that the subsequent reduction in new registrations for 2007 and 2008 may be related to fewer cases being approved by creditors where the dividend on offer was below a specified level. In response to concerns raised, the Insolvency Service led the development of a voluntary agreement aimed at encouraging best practice and streamlining the process for straightforward consumer IVAs. This “IVA Protocol” has been in effect since February 2008 and was updated in January 2013 (see Note 2).
The number of IVAs registered each year that have failed and resulted in the arrangement being terminated (by September 2013) has broadly followed the trend in overall registrations described above. It should be noted, however, that the final numbers for the most recent years are not yet known, as a large proportion of IVAs are still ongoing (see Note 8).
In percentage terms, the trend in IVAs which have failed is shown at Figure 2 below.
Figure 2. Percentage of Individual Voluntary Arrangements resulting in termination as at September 2013, by year of registration, England and Wales1
Percentage of registrations terminated
Source: Insolvency Service, September 2013
Between the years 1990 and 2002, inclusive, the percentage of IVAs registered each year that eventually resulted in termination remained fairly steady at around 30% (the lowest figure in this period being 28% for 2001 registrations and the highest 33% for 1995 registrations). The percentage of terminations has since followed a generally upward trend from 30% for 2002 to the level for 2007 registrations, which currently stands at 38%. As at September 2013, nearly one third (33%) of IVAs registered in 2007 were still ongoing (Table 1 below), so the percentage of terminations is likely to increase going forward. It is not possible to make direct comparisons between termination rates for IVAs registered after 2008, and those registered before, as over half of IVAs are still ongoing for more recent registrations.
Looking instead at, for instance, the percentage of IVAs that failed within a year of registration, comparisons can be made on a more consistent basis between registration years.
The overall percentage of IVAs registered between 2002 and 2006, which eventually resulted in termination, was 36%. Around 6% of IVAs registered in these years were terminated within one year, 17% within two years. Almost half, therefore, of all eventual terminations took place within the first two years (though many IVAs for 2005 and 2006 are still ongoing).
Figure 3. Percentage of Individual Voluntary Arrangements resulting in termination as at September 2013, by year of registration and time elapsed between registration and termination, England and Wales1
Percentage of registrations terminated within time period
Source: Insolvency Service, September 2013
For IVAs registered in 2007, 21% terminated within the first two years, higher than for the 2002-2006 average. For IVAs registered in 2008, the percentage terminating within a year was higher than for 2007 registrations, but the high percentage of IVAs still ongoing as at September 2013, and policy changes since their registration, means that it is still too early to predict whether the overall termination rate will be higher for 2008 registrations than for 2007 registrations.
A discontinuity in the data means that data for 2009 and 2010 are unavailable (see Note 6). For IVAs registered in 2011, around 4% and 11% had terminated within the first one and two years respectively; much lower rates than for 2008 and earlier years. A similar pattern can be seen for IVAs registered in 2012, though data are only available for one year.
Table 1: Individual Voluntary Arrangements by year of registration and outcome status as at September 2013, England & Wales1 2
Source: Insolvency Service, September 2013
Figure 4. Individual insolvencies, 1990 to 2012, England & Wales
Number of new cases
Source: Insolvency Service
Notes to accompany the Individual Voluntary Arrangement outcome statistics
1. An Individual Voluntary Arrangement (IVA) is an alternative formal debt solution to bankruptcy and was established by Part VIII of the Insolvency Act 1986. It is a legally binding agreement between a debtor and his/her creditors about how the debts will be paid (either in full or in part). An application is made to court and an insolvency practitioner is appointed to supervise the arrangement. More detail is available here: alternatives to bankruptcy
2. The Straightforward Consumer IVA Protocol has been in operation since February 2008. The latest version can be found on the Insolvency Service website here: The Straightforward Consumer IVA Protocol.
3. Individual insolvencies in England and Wales comprise bankruptcy orders, individual voluntary arrangements and, since 6 April 2009, debt relief orders; details are available on the Insolvency Service website: http://www.bis.gov.uk/insolvency/personal-insolvency. Policy responsibility for individual insolvency in Scotland and Northern Ireland lies within the devolved administrations.
4. Definition of terms
a) Completion: where the supervisor has issued a certificate (“the completion certificate”) stating that the debtor has complied with their obligations under the arrangement.
b) Termination (failed): where the supervisor has issued a certificate (“Certificate of Termination”) ending the arrangement because of the debtor’s failure to keep to the terms of the arrangement.
c) Ongoing (Current): where the arrangement is continuing.
d) Revoked or suspended: where an application to court has been made to challenge the decision of a meeting approving an IVA, the court may revoke or suspend the approval or call for further meetings to be held. Notification of such action should be forwarded to the Secretary of State within 7 days of the making of the order.
Background and explanation of data
5. The Insolvency Service first published these figures in 2010, implementing a recommendation from the Insolvency Practices Council (IPC) to publish annual statistics showing the current status of IVAs set up since their introduction.
6. These statistics were not published in 2011 due to data quality issues following a major refresh to the Insolvency Service's IT systems. IVAs registered in 2010 and earlier years have unreliable data relating to the date of “status change” – that is, the date an IVA changed its status from “ongoing” to: “completed”, “terminated”, “suspended” or “revoked”. This has caused a discontinuity in the statistics showing termination rates by the amount of time elapsed since registration (Figure 3); data for 2009 and 2010 are not available on this basis. Status change dates for IVAs registered in 2011 and later years have been sourced from the current IT system, with equivalent data for IVAs registered in 2008 and earlier sourced from archived data.
7. The total figures for each year are not entirely consistent with those published in the quarterly Insolvency Statistics release. This is because the IVA outcome figures have been compiled using a bespoke extract from a live database, whereas the headline figures for earlier years were produced using a different reporting system. Additionally, some IVA registrations will have subsequently been revoked or suspended, or found to have been registered in error; these are not included here. This edition excludes IVA registrations from 1987 to 1989 inclusive as the discrepancies for these years were unacceptably high.
8. The duration of an IVA will vary, although it is common for an arrangement to be for a 5-year period. One factor that therefore needs to be taken into account when interpreting the data for those IVAs registered in the later years is that there will be fewer completions, and possibly fewer failures, as a large proportion of these arrangements will not have reached their full term and are still ongoing. This means that for the most recent years, failure rates should be interpreted with caution, as should trends in these over time.
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