IVA figures - Q2 2010
The latest figures from the Insolvency Service have just been published, revealing that 13,466 people in England and Wales entered an IVA (Individual Voluntary Arrangement) in the second quarter of 2010.
This was yet another quarterly record. Before this, the most IVAs we'd seen in a single quarter was 13,219, in the last quarter of 2009.
The number of DROs (Debt Relief Orders) also hit a new high, at 6,295. DROs were only introduced in April last year, and the number of people entering a DRO has increased in every quarter since then.
Overall, however, the total number of insolvencies fell by 2.6% in the second quarter of the year, thanks to a 20% drop in the number of people entering bankruptcy between April and June this year.
"It's tempting to think that 'the worst is behind us' now that the recession has ended, but a lot of people will be feeling the effects for years to come," said a debt expert at Think Money.
"How many people have seen their incomes drop as a result of the country's economic problems? And how many of them have yet to notice any improvement since the economy started doing better again? Just because the GDP figures show that the economy grew by 1.1% in the second quarter of the year, that doesn't mean individuals will necessarily be doing any better.
"Add to that the impact of the upcoming 'austerity measures', and a lot of people are likely to find their financial situation is nowhere near as comfortable as they've grown accustomed to over the last decade or so. People who've taken on a lot of debt could easily find this impacts on their ability to keep up with their payments."
Looking more closely at the statistics, however, one thing that catches the eye about the latest figures is the way the balance between the different forms of insolvency is changing. Historically, the number of bankruptcies has been far greater than the number of IVAs (and, more recently, DROs).
As recently as 2003, there were three or four new bankruptcy cases for every new IVA. Even in the first quarter of this year, there were 18,256 bankruptcies, which accounted for more than half of the personal insolvencies in England and Wales (there were 11,782 IVAs and 5,644 DROs, so a total of 17,426 IVAs and DROs).
In the second quarter, however, the fall in bankruptcies and the rise in both IVAs and DROs meant this was no longer true. The figure of 14,982 bankruptcies was dwarfed by the 19,761 IVAs and DROs (6,295 DROs and 13,466 IVAs).
In fact, the number of IVAs alone in Q2 was a mere 10% below the number of bankruptcies.
We don't have the annual figure for 2010 yet, of course, but looking back over the last ten years, the number of bankruptcies went from 21,550 in 2001 to 74,670 in 2009 - so it's about 3.5 times higher now.
When it comes to IVAs, though, the total number of IVAs per year rose from 7,978 in 2001 to 47,641 in 2009. So we're now seeing around six times as many IVAs per year as we were at the start of the millennium.
If you are having problems with your finances and are looking for further information on IVAs, DROs or other debt solutions such as debt consolidation - the Think Money debt advice portal may be useful.