Insolvency stats miss full scale of debt, claim practitioners

Quarterly figures released by the Insolvency Service, the government register of bankruptcies and individual voluntary arrangements, have come under fire from practitioners who say they fail to take into account the figures of failed IVAs and the number of debt management programmes.

Debt management programmes are similar to IVAs, but are not a legislative process and do not involve insolvency practitioners. DMPs consolidate all unsecured debts into a single monthly payment over a period of time agreed by the creditors.

Melanie Giles, insolvency practitioner at Jones Giles, said: ‘Given that the Insolvency Service statistics only focus on formal appointments, i.e. bankruptcies and IVAs, the ongoing trend of consumer indebtedness is not being appropriately represented ­ the number of people entering into debt management programmes is actually growing at a faster rate.

‘The Insolvency Service statistics ought to also focus on the number of failed IVA cases, particularly during their first year,’ Giles added.

Joanne Wright, personal insolvency partner at Begbies Traynor, said: ‘The statistics don’t reveal the whole picture, the demand for DMPs are high and the figure is unknown but towards the last six months of this year we are going to see a considerable rise in bankruptcy.’

Referring to the IVAs, a spokeswoman for the Insolvency Service said: ‘Although there is no legislative requirement to supply further information, we are currently working with the industry to deliver more market information in regards to IVAs’.

The Insolvency Service did not have a timescale of when that would be put in place.

DMPs are unlikely to be incorporated into government figures since the Insolvency Service has no connection with them and cannot measure them, the spokeswoman said.

According to the Insolvency Service there was a 1.7% increase in personal insolvency, and 4.3% increase in IVAs compared to last quarter.