Article From Credit Today On Lowest Insolvencies For Four Years

Depth_Charge

Hi

Interesting article below on the continued decline in insolvencies - the paragraph from the article highlighted below on the falling numbers of IVAs is significant I would say given some of the recent posts, debates & discussions on here and whats happening in general.

"Mark Sands, RSM Tenon’s head of personal insolvency said: “The fact that IVAs have had the biggest drop since quarter 1 in 2008 shows that there is falling confidence in the level of future incomes which underpin most IVAs, so people may be staying in Debt Management Plans or could actually be ignoring their financial debt problems until they can see a future."

http://www.credittoday.co.uk/article/14506/online-news/2012-will-show-lowest-insolvencies-for-four-years

Resounding proof of what some independent anylists & advisers are saying.

What spin some of the pro IVA posters may try to put on this article and figures... well, lets wait and see (they will more than likely be competing more with each other soon if these predictions are right,,mmm thinking about it we can already see the signs of that maybe:)

The truth is that there is a real problem developing and as I have said before its time for genuine independent impartial advice (not commission & sales) and for the experienced responsible people in the debt advice / IVA sector to step up to the plate, help and do their best for people that are struggling or it WILL eventually just all fall apart and that will help nobody.

My take again

milliemonster

I totally agree that to go into an IVA you do need to have some semblance of security of employment and particularly your income which is increasingly difficult in the current climate for some. However, being in an IVA myself and I wouldn't class myself as a 'pro IVA poster', they're not for everybody but certainly offer a viable option for many as opposed to other options such as bankruptcy or neverending DMP's.

Whats interesting to note however is that as people's employment prospects change, so does the IVA protocol, compared to the inflexibility of IVA's from many years ago when there was such a high failure rate, creditors are now more mindful of the volatility of the current economy and people's fortunes and IVA's are generally much more flexible now and I would envisage that this is a trend that will continue.

It's in nobody's interest for an IVA to fail, creditors certainly don't want them to, debtors don't either once they are committed and so I think the IVA landscape will change to accommodate changes in people's circumstances and it will continue to be a viable alternative debt solution.

Depth_Charge

milliemonster wrote: »

I totally agree that to go into an IVA you do need to have some semblance of security of employment and particularly your income which is increasingly difficult in the current climate for some. However, being in an IVA myself and I wouldn't class myself as a 'pro IVA poster', they're not for everybody but certainly offer a viable option for many as opposed to other options such as bankruptcy or neverending DMP's.

Whats interesting to note however is that as people's employment prospects change, so does the IVA protocol, compared to the inflexibility of IVA's from many years ago when there was such a high failure rate, creditors are now more mindful of the volatility of the current economy and people's fortunes and IVA's are generally much more flexible now and I would envisage that this is a trend that will continue.

It's in nobody's interest for an IVA to fail, creditors certainly don't want them to, debtors don't either once they are committed and so I think the IVA landscape will change to accommodate changes in people's circumstances and it will continue to be a viable alternative debt solution.

Hi

Its a good post millie, some of the IVA people (including people I know on a professional level) recognised the problem some time ago and they are are pulling out the stops to genuinely help and I believe they will be the ones that will survive and prosper in the long run and I actually wish them well.

There does not seem to be any recent up to date figures on the IVA failure rates but my thoughts are that they would not make pretty reading at all and if there was any statistical record of current ongoing problems with IVAs then this would probably be the equivelent of a horror show.

This whole situation could quite easily excelerate out of control as disposable income takes a rapid dive over the comimg months and years and people come under the cosh like never before.

Its not the IVA providers fault, it is mainly due to the unique set of economic circumstances, cuts etc - it is not just IVAs either - people in bankruptcy IPAs & IPOs and debt management plans are facing excactly the same problems.

The DMP providers, both the free & fee chargers know there is a problem and it that wont go away - how they handle it could be interesting as BOTH these types of providers depend on either fees or payments FROM creditors.

The wolf is not only at the door for those in debt he could well be soon knocking on the door of some in the actual debt advice sector (me thinks some of you know excactly what I mean)

Have some of them took their eye of the ball? you bet they did / have.

milliemonster

Yes I agree, I guess I feel very lucky in that I am in quite a secure job along with my husband (if there is such a thing) and we went into this with our eyes open, although I am still very aware that things can change and we're only coming up to 2 years in. I am also fortunate that I earn unsocial hours of which I only have to give 50% into the IVA so have a bit of a buffer there for emergencies etc which many don't have.

My biggest gripe is that the guidelines for allowances haven't been updated since 2008 (not sure if it's the same for bankruptcy) and I do think they should be reviewed on a yearly basis, however, I have to say my IP has been very reasonable in that at our review when we had increased expenditure way above the 'guidelines' they accepted it without question.

I do agree with the gist of the article in that I believe there are thousands of people out there who are still burying their heads in the sand and not tackling the debt head on, many of my colleagues with less monthly income than us and have much more debt are still denying they have a problem and are just waiting another 20 years or so and plan to pay it off when they retire with their pensions (if we have any!)

Depth_Charge

milliemonster wrote: »

Yes I agree, I guess I feel very lucky in that I am in quite a secure job along with my husband (if there is such a thing) and we went into this with our eyes open, although I am still very aware that things can change and we're only coming up to 2 years in. I am also fortunate that I earn unsocial hours of which I only have to give 50% into the IVA so have a bit of a buffer there for emergencies etc which many don't have.

My biggest gripe is that the guidelines for allowances haven't been updated since 2008 (not sure if it's the same for bankruptcy) and I do think they should be reviewed on a yearly basis, however, I have to say my IP has been very reasonable in that at our review when we had increased expenditure way above the 'guidelines' they accepted it without question.

I do agree with the gist of the article in that I believe there are thousands of people out there who are still burying their heads in the sand and not tackling the debt head on, many of my colleagues with less monthly income than us and have much more debt are still denying they have a problem and are just waiting another 20 years or so and plan to pay it off when they retire with their pensions (if we have any!)

Hi

It is likely there will be many more articles and TV programmes on these issues / subjects along with those we are already seeing (including on TV last night).

It is going to get a whole lot worse, no doubt about it in my opinion, I am not sure the powers that be have grasped this yet.

I dont think some of the charity debt advice organisations truly grasp what is going on and after listening recently to some in the CAB then I dispair, I honestly do, sorry guys, out of touch comes to mind on occasions.

PS - No, I would not class you as a pro IVA poster as such - you add a good balance based on your experience and if the IVA works for you then all the better and good luck with it.

debtinfo

Another thought on the reduction of insolvencies altogether including IVAs and Bankruptcies. It may be that simply not as many people are reaching the tipping point at the moment for 2 reasons, credit was very easy to get at one point but has tightened since 2008, that means not as much debt going in and not as many people over borrowing (i know there will always be some that find a way) that leaves the ones with more historic debt many of which are being kept at bay by the historic low mortgage interest rates. so people even in other financial difficulties manage to not go over the edge. Of course that has to change at some point in the future. I know from my contacts that more and more insolvencies at the moment are on historic debts rather than debts taken out very close to the bankruptcy date

Gimpsdad

Isn't this the same RSM Tenon that have left the Personal Insolvency market? Nonetheless, interesting whichever viewpoint you have.

It may well be that DMP's are being viewed as the safest point in an unstable world, it is just a shame that the non fee payers are refusing to sign up to the proposed new protocol on DMP's which they seem to be keen on fee payers signing up to. Which, astonishingly, seems to have me agreeing with DC.

Depth_Charge

Hi

They are not the first to leave and rumour has it that they wont be the last.

I suppose that they, the figures and all the indications across the advice & economic sector could be wrong though and peoples incomes are on the up and the IVA industry is thriving and a secure and event free way of clearing your debts.

The DMP point is an interesting one and not just the aspect you have raised but perhaps it is just another attempt to deflect the debate away from IVAs, that wont work, neither will the spin or sales patter Im afraid.

GD2_2

Completely different take on the same stats from a respected IP, so who do you believe?

Debt Advisor: “Insolvencies could be five times higher”


November 02, 2012
Figures published today by the Insolvency Service show that company liquidations in England and Wales in the third quarter of this year were down 2.8% on the previous quarter and down 6.6% on the same quarter in 2011. Personal insolvencies dropped in the third quarter 2012 to 28,062 and were 7.2% less than the same period 12 months ago.

Bev Budsworth, managing director of multi award-winning The Debt Advisor said: “It’s good to see that today’s corporate insolvency figures are down but they really don’t tell the whole story – we know from previous experience that for every one of today’s statistics, there are bound to be at least four or even five companies with no assets or cash to fund the liquidation process who will simply be struck off for failure to file their accounts.”

Wading through treacle

“These companies are effectively ‘wading through treacle’ at the moment – faced with so many urgent issues, they are completely paralysed to respond. Given enough time and inaction, these so-called ‘Zombie companies’, maybe as many as 20,000 a year, will eventually go to the wall in effective silence, unable to afford the liquidation process.

“I believe that today’s figures mask the true problem and the reality is that level of corporate insolvency could be up to five times higher.

Bev’s comments come at a time of intense pressure on companies who are trying to keep themselves solvent. Although recent GDP figures painted a more optimistic future for the country, the level of output in the third quarter of this year was almost exactly the same as it had been in the third quarter of 2011, therefore, remaining relatively flat.

“We continue to see proof that it’s the smaller businesses that are failing,” added Budsworth. “According to Experian, over 44% of corporate insolvencies in September were smaller businesses – between one and ten employees. In our experience, while the sluggish economy is certainly not helping, there are other ‘human’ factors including shareholder or director disputes, poor management or just naivety that have ultimately led to their downfall.”

Nightmare on the High Street

Bev continued: “It continues to be tough for High Street retailers despite a recent rise in retail sales. Sales in September were up around 2.5% on the same month in 2011 and 0.6% up on August 2012 figures, with the Olympics cited as a reason people put off clothing purchases.”

“The real problem we are seeing now is the type of retailers going under. We are seeing more and more insolvencies in larger retailers, those with multiple outlets, affecting many staff.

“Yesterday’s announcement that electrical retail giant Comet will be placed into administration next week reminds us that regardless of whether we are out of a recession, we are certainly not out of the woods yet with this being the biggest casualty of the High Street since Woolworths in 2008. Up to 6,500 jobs and 240 stores are now at risk at the retailer that has been established for nearly 90 years.

“Earlier in this week, Home Retail Group also announced plans to shut or relocate 75 of its Argos stores in the next five years, with 10 stores due to close before the end of the year.”

Bev’s comments are echoed in a recent retail report from PwC and Local Data Company. The report found that as many as 20 stores a day closed throughout the first half of the year. This figure rose to 32 closures per day throughout July and August.

Over expansion was blamed for the closures, with toy shops, clothes shops, jewellers and furniture stores making up the bulk of those shutting their doors and coffee shops, discount stores, bookmakers and charity shops bucking the trend.

The big squeeze

“Today’s figures for personal insolvency were down – which is good news and also good to see that more people had opted for an Individual Voluntary Arrangements (IVA). However, our whole economy remains extremely fragile with insolvency in general showing no dramatic reduction,” said Budsworth.

“We are now officially out of a recession and unemployment continues to decline. However, the big squeeze on people’s finances continues. Only this week, KPMG reported that one in five people, that’s nearly five million people across the UK, failed to earn the living wage - a wage that enabled a basic standard of living.

“This is a real problem; with energy prices on the rise again, fuel poverty will again hit the headlines this winter as many more people struggle to pay their bills. Add to this the fact that more and more companies are downsizing to improve the bottom line, it could really shape up to be a bleak winter for many.”

Today’s personal insolvency figures cover formal insolvency plans such as IVAs, bankruptcies and Debt Relief Orders (DROs).

Bev continued: “The figures don’t tell the real story. For every 9,000 people that choose a formal insolvency plan each month, around 15,000 opt for an informal debt management plan.”

Debt management plans are often preferred as a ‘softer’ option to the IVA and while they can be in the short term, for longer term debt, interest may continue to accrue and creditors are not stopped from taking action.

“Worse still, we are seeing more and more people coming to us after taking out payday loans which they can no longer afford. These types of loans are easy to obtain but notoriously difficult to pay off with APRs often over 4,000%.

“Resorting to pay day loans when you are already in debt just adds to the misery. These loan companies are not the most patient if you cannot pay back the loan - and the added pressure can often seriously affect your wellbeing.”

Bev concluded: “If you are unable to afford your commitments, there are a number of formal and informal plans that enable you to work with your creditors and repay your debts at a level you can afford.”

The figures from the Insolvency Service consisted of 12,668 Individual Voluntary Arrangements, a decrease of 2.9% on the corresponding quarter in 2011, 7,617 bankruptcies, representing a decrease of 20.5% on the corresponding quarter of 2011 and 7,777 Debt Relief Orders, up 2.3% on the corresponding quarter in 2011.

Depth_Charge

GD2 wrote: »

Completely different take on the same stats from a respected IP, so who do you believe?

Debt Advisor: “Insolvencies could be five times higher”


November 02, 2012
Figures published today by the Insolvency Service show that company liquidations in England and Wales in the third quarter of this year were down 2.8% on the previous quarter and down 6.6% on the same quarter in 2011. Personal insolvencies dropped in the third quarter 2012 to 28,062 and were 7.2% less than the same period 12 months ago.

Bev Budsworth, managing director of multi award-winning The Debt Advisor said: “It’s good to see that today’s corporate insolvency figures are down but they really don’t tell the whole story – we know from previous experience that for every one of today’s statistics, there are bound to be at least four or even five companies with no assets or cash to fund the liquidation process who will simply be struck off for failure to file their accounts.”

Wading through treacle

“These companies are effectively ‘wading through treacle’ at the moment – faced with so many urgent issues, they are completely paralysed to respond. Given enough time and inaction, these so-called ‘Zombie companies’, maybe as many as 20,000 a year, will eventually go to the wall in effective silence, unable to afford the liquidation process.

“I believe that today’s figures mask the true problem and the reality is that level of corporate insolvency could be up to five times higher.

Bev’s comments come at a time of intense pressure on companies who are trying to keep themselves solvent. Although recent GDP figures painted a more optimistic future for the country, the level of output in the third quarter of this year was almost exactly the same as it had been in the third quarter of 2011, therefore, remaining relatively flat.

“We continue to see proof that it’s the smaller businesses that are failing,” added Budsworth. “According to Experian, over 44% of corporate insolvencies in September were smaller businesses – between one and ten employees. In our experience, while the sluggish economy is certainly not helping, there are other ‘human’ factors including shareholder or director disputes, poor management or just naivety that have ultimately led to their downfall.”

Nightmare on the High Street

Bev continued: “It continues to be tough for High Street retailers despite a recent rise in retail sales. Sales in September were up around 2.5% on the same month in 2011 and 0.6% up on August 2012 figures, with the Olympics cited as a reason people put off clothing purchases.”

“The real problem we are seeing now is the type of retailers going under. We are seeing more and more insolvencies in larger retailers, those with multiple outlets, affecting many staff.

“Yesterday’s announcement that electrical retail giant Comet will be placed into administration next week reminds us that regardless of whether we are out of a recession, we are certainly not out of the woods yet with this being the biggest casualty of the High Street since Woolworths in 2008. Up to 6,500 jobs and 240 stores are now at risk at the retailer that has been established for nearly 90 years.

“Earlier in this week, Home Retail Group also announced plans to shut or relocate 75 of its Argos stores in the next five years, with 10 stores due to close before the end of the year.”

Bev’s comments are echoed in a recent retail report from PwC and Local Data Company. The report found that as many as 20 stores a day closed throughout the first half of the year. This figure rose to 32 closures per day throughout July and August.

Over expansion was blamed for the closures, with toy shops, clothes shops, jewellers and furniture stores making up the bulk of those shutting their doors and coffee shops, discount stores, bookmakers and charity shops bucking the trend.

The big squeeze

“Today’s figures for personal insolvency were down – which is good news and also good to see that more people had opted for an Individual Voluntary Arrangements (IVA). However, our whole economy remains extremely fragile with insolvency in general showing no dramatic reduction,” said Budsworth.

“We are now officially out of a recession and unemployment continues to decline. However, the big squeeze on people’s finances continues. Only this week, KPMG reported that one in five people, that’s nearly five million people across the UK, failed to earn the living wage - a wage that enabled a basic standard of living.

“This is a real problem; with energy prices on the rise again, fuel poverty will again hit the headlines this winter as many more people struggle to pay their bills. Add to this the fact that more and more companies are downsizing to improve the bottom line, it could really shape up to be a bleak winter for many.”

Today’s personal insolvency figures cover formal insolvency plans such as IVAs, bankruptcies and Debt Relief Orders (DROs).

Bev continued: “The figures don’t tell the real story. For every 9,000 people that choose a formal insolvency plan each month, around 15,000 opt for an informal debt management plan.”

Debt management plans are often preferred as a ‘softer’ option to the IVA and while they can be in the short term, for longer term debt, interest may continue to accrue and creditors are not stopped from taking action.

“Worse still, we are seeing more and more people coming to us after taking out payday loans which they can no longer afford. These types of loans are easy to obtain but notoriously difficult to pay off with APRs often over 4,000%.

“Resorting to pay day loans when you are already in debt just adds to the misery. These loan companies are not the most patient if you cannot pay back the loan - and the added pressure can often seriously affect your wellbeing.”

Bev concluded: “If you are unable to afford your commitments, there are a number of formal and informal plans that enable you to work with your creditors and repay your debts at a level you can afford.”

The figures from the Insolvency Service consisted of 12,668 Individual Voluntary Arrangements, a decrease of 2.9% on the corresponding quarter in 2011, 7,617 bankruptcies, representing a decrease of 20.5% on the corresponding quarter of 2011 and 7,777 Debt Relief Orders, up 2.3% on the corresponding quarter in 2011.

Hi

Interesting article and thanks for posting it up

To be honest and on the contrary, the way it reads to me is that it actually confirms what the Credit Today article and other independents say.

Depends where your interests lie really I suppose.

But the truth is that people ARE struggling to maintain payments in existing plans and it WILL get worse and they ARE worried about committing to IVAs as they can and are failing all over the place or dragging on with seemingly no end in sight.

Much better to face the situation and concentrate more on helping people through all this rather than keep plugging the same old worn out story if you ask me, but as always time will only tell.

Here is another article from the MATs much respected Joanna Elson that really nails it for me.

http://www.moneyadvicetrust.org/content.asp?ssid=173

Just my take again

immoral_angeluk

Playing devil's advocate.. my opinion on that article is that yes insolvencies may be at their lowest, but does that account for the people who NEED to go insolvent but can't afford the fees (considering that bankruptcy can cost £700/£525 up front and I know MANY people who want to go BR but can't...).