Total personal insolvencies in Scotland for 2008 were 19,864 and there were 1,638 personal insolvencies in Northern Ireland.
Pat Boyden, personal insolvency expert at PricewaterhouseCoopers LLP, said: "Most casual observers would have expected numbers of both types to be going through the roof. Indeed, at the end of 2007, when there was much talk about the declining economic conditions, some experts were predicting 130,000 or more insolvencies in 2008. PwC was more cautious.
"IVAs were largely based on consumer debt and that had been stagnant for a number of months, suggesting perhaps that finances were stabilising in many households. There had been, however, a shift to secured lending based on the availability of second mortgages and increasing house prices. Without the basic components of an IVA, namely unsecured debt, there would be less demand: secured borrowing would bring its own problems in the shape of repossessions.
"The gradual acceptance of the IVA Protocol, and the worsening financial position resulted in a small increase in IVA figures in the last six months, but with individuals having less to offer, other forms of insolvency became a better option.
"Bankruptcy numbers are on the increase and the year’s total is a record. To say that individuals have simply shifted from IVAs to bankruptcies in order to deal with their problems is a little simplistic, but anecdotal evidence suggests that there is some support for the argument. In the current climate, there will be an increase in traders, company directors with personal guarantees, professionals, and entrepreneurs in general seeking bankruptcy as relief from their debts."
PwC said its analysis revealed that these trends were likely to continue in 2009. The concern for creditors is that weakening IVA dividends and numbers will put more pressure on balance sheets, but even so, an IVA will return more than a bankruptcy. Perhaps it is time for creditors to review their attitudes towards the IVA.
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