Making Sense of the Numbers: The Shift from Non‐consensual to Consensual Debt Relief and the Construction of the Consumer Debtor
| Date | 01 June 2019 |
| DOI | http://doi.org/10.1111/jols.12151 |
| Author | Katharina Möser |
| Published date | 01 June 2019 |
JOURNAL OF LAW AND SOCIETY
VOLUME 46, NUMBER 2, JUNE 2019
ISSN: 0263-323X, pp. 240±70
Making Sense of the Numbers: The Shift from Non-
consensual to Consensual Debt Relief and the Construction
of the Consumer Debtor
Katharina MÎser*
This article analyses trends in the number of individual insolvency
proceedings in England and Wales, particularly a shift from non-
consensual debt relief to consensual Individual Voluntary Arrange-
ments (IVAs) and, connected to that, an increased privatization of the
process. Seeking to conceptualize IVA users, it builds on American
scholarship linking the development of bankruptcy rates to the con-
struction of the consumer debtor. Based on this theory and empirical
evidence, its findings broadly indicate that a majority of IVA users do
not match the image of a strategic actor. Rather, they belong to the most
vulnerable groups, whose decision in favour of IVAs is the result of
external constraints and irrational biases, which commercial providers
tend to exploit. Building on this characterization of IVA users, the
article contributes to the critical discussion of aforementioned trends,
arguing that reforms should be contemplated to partially reverse them.
INTRODUCTION
Due to a dramatic increase in personal debt levels, annual individual
insolvencies have risen steadily since 2015.
1
This increase in the overall
number of individual insolvencies is largely driven by a record number of
240
*Birmingham Law School, University of Birmingham, Birmingham B15 2TT,
England
k.moser@bham.ac.uk
I thank Sophie Boyron, Catherine Mitchell, Wolfgang MoÈser, Joseph Spooner, Lisa
Webley, and the anonymous referees for their comments on earlier drafts. All errors
remain my own.
1 See Insolvency Service, Insolvency Statistics ± July to September 2018 (Q3 2018)
(2018) 11; P. Inman, `UK insolvencies hit six-year high as finances come under
pressure' Guardian, 27 July 2018, at
jul/27/uk-insolvencies-hit-six-year-high-as-record-number-take-out-ivas>.
ß2019 The Author. Journal of Law and Society ß2019 Cardiff University Law School
people using consensual debt relief procedures ± Individual Voluntary
Arrange ments (IV As)
2
± rather th an non-co nsensua l ones, suc h as
bankruptcy and debt relief orders (DROs). As a consensual debt relief
procedure, IVAs are based on an agreement between the debtor and her
creditors.
3
In contrast, bankruptcy and DROs provide statutory debt relief.
4
The increase in annual IVA numbers is a long-term trend that started after
2003.
5
The Insolvency Act 1986 had introduced IVAs with a view to their
potential benefit for a very particular section of the indebted population: a
small group of self-employed traders.
6
However, after 2003, commercial
IVA providers converted them into a mass remedy for over-indebted
consumers.
7
Although these market developments ran counter to the original
intention of the legislature, official government policy endorsed and indeed
encouraged them as part of a `can pay should pay' strategy.
8
In contrast, the
overall nume rical signif icance of non- consensual d ebt remedies h as
declined. More precisely, since 2010 there has been a dramatic fall in
bankruptcies.
9
Although the newly introduced DRO procedure, which since
2009 provides a simplified process for the so-called `no-income, no asset'
debtors,
10
explains part of this development, it certainly fails to do so com-
pletely.
11
Taken together, these developments have significantly changed the
characteristics of consumer insolvency. Notably, there has been a major shift
from non-consensual remedies to IVAs
12
and, linked to that, an increasing
privatization and marketization of debt relief processes.
241
2 The number of IVAs in 2017 (59220) was the largest annual number since they were
introduced in 1987.
2016), rule 15.34 (6) for the procedural details and effects of such an agreement.
4 See the discharge provisions for bankruptcy (IA 1986, ss. 278±281) and DROs (IA
1986, ss. 251H, I).
5 See Figures 1 and 2, below.
6 Report of the Review Committee, Insolvency Law and Practice (1982) ch. 7.
7 I. Ramsay, Personal Insolvency in the 21st Century (2017) 86; I. Ramsay, `A Tale of
Two Debtors: Responding to the Shock of Over-Indebtedness in France and England
± a Story from the Trente Piteuses' (2012) 75 Modern Law Rev. 212, at 240; A.
Walters, `Individual Voluntary Arrangements: A ``Fresh Start'' for Salaried
Consumer Debtors in England and Wales?' (2009) 18 International Insolvency
Rev. 5, at 25±7.
8 See section I.2, below.
9 Plummeting for eight years, their annual number has fallen from 74,670 in 2009 to
15,084 in 2017, which is the lowest level since the early 1990s.
10 See Department of Constitutional Affairs, A Choice of Paths ± Better Options to
Manage Over-indebtedness and Multiple Debt (2004); Department of Trade and
Industry, Relief for the Indebted ± An Alternative to Bankruptcy (2005).
11 Taken together, the total number of bankruptcies and DROs in 2017 amounted to
41,202, while in 2009 the number of bankruptcies alone was at a much higher level
(74,670).
12 While in 2002 bankruptcies still constituted the standard debt relief remedy (79.42
per cent bankruptcies/20.58 per cent IVAs), IVAs now exceed the overall number of
non-consensual proceedings (59.7 per cent IVAs in 2017).
ß2019 The Author. Journal of Law and Society ß2019 Cardiff University Law School
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