Gareth Price discusses the latest insolvency statistics

Following the recent publication of Insolvency statistics, it has been reported that the number of people being declared insolvent has risen for the first time in a year, although the total remains lower than much of the past decade.

The Insolvency Service said that 19,683 people in England and Wales were made insolvent in the third quarter of 2015.  This was up 2.8% on the previous quarter, but down 18.5% on the same quarter a year earlier.  This figure included 10,197 Individual Voluntary Arrangements (IVA), 5,629 Debt Relief Orders (DRO) and 3,857 Bankruptcies

Low interest rates have assisted individuals managing their debts and household bills.  However, although there is uncertainty when interest rates will rise, it is certain that rates will rise and therefore apply more pressure on household finances.  Clearly those struggling now may have no alternative but to consider one form of insolvency process, whether that be an IVA, DRO or Bankruptcy. 

The Insolvency Service said that the quarter-on-quarter rise in individual insolvencies was driven by an increase in IVAs.  The number of people being made bankrupt fell to 3,857 in the third quarter of the year. This was the lowest level for 25 years.

The total could fall further, as in October 2015 rules changed so the minimum debt a creditor must be owed in order to be able to petition to make someone bankrupt increased from £750 to £5,000.

Even though the cases reported relate to formal insolvency processes, it is important to remember that insolvency figures do not reflect the full extent of problem debt.  It has been reported that more than 600,000 people contacted a national debt charity for debt advice last year and insolvency was the right option for just 20% of them.

The level of unsecured debt is on the rise and figures from the Bank of England show that unsecured borrowing by individuals continues to rise. This was principally due to personal loans, which rose by £1bn in September. Borrowing on credit cards rose by £288m last month, the Bank said.

In contrast, the Insolvency Service added that the number of businesses becoming insolvent continued to fall.

Some 3,539 companies entered insolvency in the third quarter of the year, 4.4% down on the previous quarter and 10.2% lower than the same quarter last year.

Should you require any advice or assistance, please contact us on 0207 186 1144.

Author
Gareth Price
Tel: +44 (0) 20 7186 1173
Email: gprice@moorfieldscr.com

About Moorfields

Moorfields is one of the UK's leading independent firms of restructuring and insolvency specialists. Our highly skilled teams include restructuring professionals and licensed insolvency practitioners who provide leadership, experience and high quality advice to companies and their stakeholders in financially distressed situations

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