As with any other types of statistics, there are a number of ways to interpret bankruptcy statistics in the UK. However, before any meaningful data can be gleaned from these statistics, it is vital to have at least some understanding of the differences between bankruptcy and what is known as an individual voluntary agreement. To make matters even more confusing, there is also a third option, known as a debt relief order. In order to help you decipher these numbers, we will give you a brief breakdown of all three of these alternatives. We will also point out a couple of things we found especially interesting about the statistics themselves.
Bankruptcies are generally used by people who are in the most severe of situations in terms of the debt which they have accumulated. Clearly, when economic times get tougher, bankruptcies are going to rise. The basic effect of declaring bankruptcy is that one’s debts are either reduced or forgiven, depending on the type of bankruptcy. As we examine the statistics which we are going to examine, we will not consider the individual types of bankruptcy. Rather, we will consider all of the different types of bankruptcy underneath one umbrella. Global economic crises and the introduction of debt relief orders have both had measurable effects on bankruptcy statistics.
Individual Voluntary Agreements
Individual voluntary agreements have a less negative impact on a person’s credit rating than do bankruptcies. Still, in general, a rise in bankruptcies will mean a rise in individual voluntary agreements. There are exceptions to this, and we will see those exceptions as we begin to analyze the statistics themselves. For those of you unfamiliar with what an IVA is, it is basically an agreement between a debtor and his or her creditors in which the creditors agree to reduce the debts and the debtor agrees to repay them in income based installments over time; usually a period of three years.
The Statistics Themselves
One of the more interesting things we noticed in examining recent bankruptcy statistics in the UK is that between the years of 2009 and 2010, the number of declarations of bankruptcy fell (by almost fifteen thousand) while the number of individual voluntary agreements rose (by just over three thousand). This is the opposite of what had typically transpired in the decade prior to that. Another interesting thing we noticed is that between the years 2008 and 2010, the totals rose quite dramatically. There are two factors which we believe explain these changes. One factor, of course, is instability in the economy. The other is the introduction of debt relief orders.
Debt Relief Orders
Debt relief orders were made available in England and Wales as the result of a legislative act which took place in the year 2007. They are a less expensive alternative to bankruptcy which do not require court appearances. The fee for a DRO may even be paid in installments, but it must be paid in full before the order can take effect.