Personal Insolvency rising sharply according to new figures

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personal insolvency rises sharply

New figures released show a massive increase in Personal insolvency.

The latest monthly figures from the Insolvency Service for England & Wales have indicated that personal insolvency numbers increased by 35.7% in October 2023 to a total of 9,881 compared to September’s total of 7,280, and decreased by 6.1% compared to October 2022’s figure of 10,528.

Personal debt insolvencies increased by 2.1% from October 2021’s total of 9,682 and decreased by 1.7% from pre-pandemic levels in October 2019 (10,056).

The personal insolvencies consisted of 703 bankruptcies, 3,245 debt relief orders (DROs) and 5,933 individual voluntary arrangements (IVAs).

Decline in IVAs

The lower number of individual insolvencies compared to October 2022 was driven by a 27% decline in the number of IVAs. IVA numbers in 2023 to date have been lower than the record-high numbers in 2022.

DRO and bankruptcy numbers were higher than last year, with DROs in October 2023 being 71% higher than in October 2022, although the number of bankruptcies remained well below pre-2020 levels.

There were 3,245 DROs in October 2023. This was 71% higher than October 2022. DRO numbers were volatile in early 2023 at the time of introduction of new DRO hubs and are now higher than pre-2020 levels.

There were 5,933 IVAs registered in October 2023, 27% lower than October 2022. IVA numbers in 2023 to date have been lower than the record-high numbers in 2022.

There were 703 bankruptcies in October 2023 in England & Wales. The bankruptcies were made up of 553 debtor applications and 150 creditor petitions. Bankruptcies were 28% higher than in October 2022.

Debtor applications were 18% higher and creditor petitions 90% higher than in October 2022. Bankruptcy numbers so far in 2023 were higher than in the equivalent months of 2022, but remained below pre-2020 levels.

There were 7,637 Breathing Space registrations in October 2023, which is 20% higher than the number registered in October 2022. 7,509 were Standard breathing space registrations, which is 21% higher than in October 2022, and 128 were Mental Health breathing space registrations, which is 14% higher than the number in October 2022.

 

Month on month rise for Personal Insolvency

Nicky Fisher, President of R3, the UK’s insolvency and restructuring trade body said “Turning to personal insolvencies, the month-on-month rise we’ve seen is down to an increase in IVA numbers, but that may well be down to the date these processes are registered with the Insolvency Service, and changes to the rules around how this process is marketed than a sudden surge in people turning to IVAs.”

“Of more interest is the fact that Debt Relief Order numbers are at a four-year high – partly because it illustrates that the change in threshold has led to more people entering this process, but also because the rise in numbers, coupled with Bankruptcy numbers reaching their highest level since June 2021, show there is a demand for personal insolvency support due to the cost of living crisis.”

“Despite the fact that personal insolvencies are below pre-pandemic levels, household finances remain tightly squeezed. Although food inflation has fallen, prices remain higher than they were a year ago, and this, coupled with the costs of fuel and energy are a major worry for individuals and a strain on personal finances.”

“These issues, coupled with concerns about the economy, and rising prices mean people are cutting their spending back to the bone and looking for any opportunities to save money. This is likely to increase as winter sets in, as people save for Christmas and to make sure they can cover their heating and food costs.”

Personal insolvency – What is it?

Personal insolvency is when an individual has failed to meet the repayments on their personal debts. This may be due to a lack of income, unexpected expenses or simply not keeping up with payments.

It can have serious implications for individuals and their families, as it can lead to bankruptcy or repossession. Depending on the situation, it may also affect a person’s credit rating and ability to secure further borrowing.

For those struggling with debt, it’s important to seek professional advice as soon as possible in order to avoid personal insolvency. Advice services such as Citizens Advice Bureau, StepChange Debt Charity and the Money Advice Service are available and provide free help and guidance on managing money.

If personal insolvency is unavoidable, individuals are able to apply for a Debt Relief Order (DRO) or an Individual Voluntary Arrangement (IVA). These government-backed initiatives can help debtors deal with their debts in an official and legal way.

A DRO will usually last for 12 months and will mean that unsecured debts (those not secured against property) are written off at the end of this period. An IVA will last longer and typically involves paying back some of the debt in instalments over a fixed period, usually five years.

It is important to remember that declaring insolvency does have serious long-term consequences and should be seen as a last resort only after all other options have been exhausted.

People who declare  insolvency are likely to be refused credit for a minimum of six years and more, depending on the type of debt relief chosen. They may also be subject to restrictions such as not being able to act as a company director or make certain financial decisions.

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