The number of IVAs transacted in the last quarter of 2007 plummeted by 27.3% on the same period the previous year as creditor approval criteria tightened.
There were 9,188 agreements placed in the fourth quarter of 2007, prompting many industry figures to warn again on the impact the stringent criteria from The Insolvency Exchange is having on the market.
Beverley Budsworth, managing director of The Debt Advisor, said it is not surprising to see the numbers of IVAs continuing to fall throughout 2007.
She explained: “The IVA industry has seen a turbulent year; The Insolvency Exchange (TIX) introduced IVA fee capping arrangements and some creditors (banks) introduced hurdle rates of 40% or simply rejected the IVA’s put forward.
“These factors have made the management of many smaller IVAs economically less viable.
“In-turn, we have seen share prices of some larger AIM-listed IVA providers crash, forcing them to submit less IVA applications as they cut marketing spend, concentrating on more informal debt management plans.”
Total personal insolvencies for 2007 stood at 106,645 – with bankruptcies at 64,480, 2.4% higher than in 2006. There were 3,135 corporate liquidations in the fourth quarter of 2007.
However, chartered accountancy firm, Benedict Mackenzie, also warned that figures on corporate insolvencies do not tell the full story.
Rupert Mullins, partner at Benedict Mackenzie said: “The 32% drop in the number of company insolvencies flies in the face of recent reports of a downturn in the economy.
“It appears that many companies are weathering the storm for now, but if economic conditions do not improve over the next few months, we expect to see the number of insolvencies increase significantly by the time of next quarterly report.”
Source: Niche Personal Loans