What is the insolvency register?
Debts can be a burden that affect both the financial and emotional wellbeing of any individual struggling to repay them. However, there are various options for people who are insolvent – options that can protect them from legal action or help restructure their debts. There are also negative consequences of insolvency solutions, such as restrictions on financial activities or the need for a public declaration of insolvency.
When someone does use an insolvency solution to help with their debts, they will be added to something called the Individual Insolvency Register. This applies to people living in England and Wales, whereas in Scotland there is the Register of Insolvencies and in Northern Ireland the Individual Voluntary Arrangement Register.
These registers can be searched by the public and exist so that anyone including employers, landlords, lenders and credit reference agencies can verify details of insolvency.
What are the different types of insolvency?
There are three types of insolvency solutions in England, Wales and Northern Ireland; bankruptcy, Individual Voluntary Arrangements and Debt Relief Orders.
- Bankruptcy is a legal procedure for people unable to pay their debts, that involves sending an application to the Insolvency Service in England and Wales or the High Court in Northern Ireland, with details of what you owe and your income. If the application is successful, all unsecured debts will be written off and your creditors will no longer be allowed to pursue payment. Any assets you have would be sold off and there are quite severe financial restrictions during the bankruptcy period. You can learn more in this article about bankruptcy and its effect on credit scores.
- An Individual Voluntary Arrangement (IVA) is an alternative to bankruptcy that allows you to make reduced debt repayments over a specific period and prevents your creditors from taking you to court. It does, however, have very specific requirements for qualification that you can learn about in our IVA article.
- Debt Relief Orders (DROs) are low cost alternatives to bankruptcy and are suitable for people with a lower level of debt and very few assets. They last for twelve months and prevent creditors from taking you to court during that period.
There are different alternatives available in Scotland including sequestration, which is the Scottish equivalent of bankruptcy, a trust deed and Minimal Asset Process bankruptcy. You can find out more information about how insolvency solutions work in the part of the UK you live in here.
What information is on the insolvency register and for how long?
The exact details recorded will depend on the type of insolvency solution that is being listed. Most cases will contain a name, a full address, gender, date-of-birth, the name of any appointed insolvency practitioner and details on when the agreement started and/or when it is due to end.
The reason so much detail is recorded is to avoid cases of mistaken identity. Researching people with common surnames or with similar names in the same location may make it difficult for lenders or employers to confirm their insolvency status, without further information. The Insolvency Service is required by law to keep a register and it is useful for debt recovery and reviewing creditworthiness.
As well as bankruptcy, IVAs and DROs, the register contains other agreements like Bankruptcy Restrictions Orders (BROs), which limit your financial activity. A full list of these can be found on the Insolvency Service website.
If you are made bankrupt, your details will remain on the register for three months after you are ‘discharged’. This is when you are no longer responsible for debts you accrued before going bankrupt and are relieved from restrictions enforced during the bankruptcy period. DRO and IVA records are kept on the register for up to three months after they are completed or revoked.
In the case of an IVA or DRO being revoked, this means the terms of the agreement were breached, which could be because of a change in finances or not cooperating with the official receiver. The agreement, and any protections or debt relief it offers, will be terminated. If conditions are met for the duration of the agreement then it will be successfully completed and in the case of an IVA, a certificate of completion will be issued.
How does being on the insolvency register affect a credit report?
Lenders use the information in your credit report to judge whether you are likely to keep up repayments on a loan and, therefore, if they should offer you credit. IVAs, DROs and bankruptcy will be listed on your credit report for six years after the point at which they begin, or until they are completed if that is not within six years. This sends a serious signal to potential lenders that you have had trouble paying your debts and that there may be an increased risk of lending to you.
Although insolvency solutions can leave a lasting effect on your credit report, it may be the case that they are the best alternative at the time. It is possible, through responsible borrowing and making repayments, to rebuild your credit history over time. You can read more about factors that affect your credit history on our credit hygiene page.
This article was updated on 14 October 2020; all information was correct at the time of writing.
For up-to-date information, regularly check StepChange.org.
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