Contact: Sorrelle Cooper
Deloitte
Public Relations
020 7303 4820

DTI quarterly statistics released today have shown a slight drop in personal insolvency figures but a 32% increase on the annual figures.

Lee Manning, reorganisation services partner at Deloitte, commented: “While there has been a slight drop on the quarterly figures, the annual figure for bankruptcies has risen by 32%.  The increase in the number of IVAs has been widely publicised but what the figures don’t show is how many bankruptcies are as a result of failed IVAs.

“Typically, IVA ‘boutiques’ take up-front fees for preparing IVA proposals and are arguably motivated to encourage as many people as possible to go for an IVA, which may be ill-conceived and unworkable and, as a result, fail pushing the person into bankruptcy.  It is important to remember that bankruptcy itself is now far less onerous and typically lasts for only a year.  Some IVA boutiques might advise people struggling with their debts to give an IVA a try because, if it fails, bankruptcy is no longer a disaster.  In this manner, these boutiques are arguably perpetuating the cycle by promoting unworkable IVAs that end up in bankruptcies.

“Ultimately, it is a concern that a huge, unregulated market has a commercial purpose that might not tally with the best solution to its clients problems.  If the DTI cross-reference their IVA data with their bankruptcy data, they could show how many IVAs fail.  This would give a good indication of the value of the IVA process.”

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Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.