The Insolvency has published the latest Insolvency statistics between July & September. The key finding from the statistics was that total individual insolvencies increased for the fifth consecutive quarter, driven primarily by an increase in individual voluntary arrangements. Bankruptcies increased this quarter. It is likely that changes to the bankruptcy application process have affected the number of bankruptcies. Debt relief orders decreased this quarter, but were higher than a year ago because of a change to eligibility criteria.
Andrew Tate, President of insolvency and restructuring trade body R3, said “The rising cost of living and reforms to make personal insolvency procedures more accessible have combined to push insolvency numbers sharply up over the last quarter and in comparison to this time last year. Individual Voluntary Arrangement numbers, which make up the bulk of personal insolvencies, are sensitive to the cost of living. IVAs fell rapidly from 2014 onwards as wage growth finally overtook inflation after the financial crisis. Having plummeted towards 0% in 2015, inflation has been rising again this year and IVA numbers have followed.”
“Consumer debts are on the rise and savings rates are incredibly low so it’s very easy for even a small financial shock to make someone insolvent. Although wages are outpacing inflation in the economy overall, there are people on the financial edge for whom any increase in the cost of living could cause problems. When people do run into financial difficulties now, there is very little room for manoeuvre unless they act quickly and seek advice. The falling value of the pound post-‘Brexit’ referendum will continue to put pressure on wages and IVA numbers could be a useful indicator for how the vote to leave the EU is affecting personal finances.”
“Meanwhile, access to bankruptcy and Debt Relief Orders has been reformed. The welcome increase of the debt and asset limits for DROs in late 2015 means more people have been able to sort out problem debts through the formal insolvency regime than ever before. Access to bankruptcy is not so straightforward – accessing bankruptcy has been made easier by the government’s decision to switch to an online adjudicator process for some cases rather than require people to petition for their own bankruptcy through the courts. The Government, however, increased the basic fees it charges for every bankruptcy case by over 30% in July 2016 which may deter those for whom bankruptcy is the best solution.”