Personal insolvencies fall by 2%

Latest quarterly figures from the Insolvency Service for England & Wales have indicated that personal insolvency numbers decreased by 2%. The total number of individual insolvencies was 9% lower when compared to figures from Quarter 1 (Q1) 2022.

During Q1 2023, there were 29,017 personal insolvencies these comprised of 20,246 Individual Voluntary Arrangements (IVAs), 7,034 Debt Relief Orders (DROs). There were 23,179 Breathing Space registrations. This is 34% higher than in Q1 2022. Of the 23,179 Breathing Space registrations, 22,770 were Standard Breathing Space registrations and 409 were Mental Health Breathing Space registrations.

Individual voluntary arrangements (IVAs) were the most common individual insolvency procedure (70% of cases), followed by DROs (24% of cases) and bankruptcies (6% of cases). IVAs make up a larger proportion of individual insolvencies than in the past and bankruptcies a much smaller proportion. Five years ago (Q1 2018), IVAs made up 61% of individual insolvencies, compared to 24% for DROs and 15% for bankruptcies, while ten years ago, 48% of individual insolvencies were IVAs, compared to 27% for DROs and 24% for bankruptcies.

The number of DROs increased by 13% in Q1 2023 compared with the previous quarter, and was 8% higher than in the same quarter last year. 

The number of bankruptcies registered in Q1 2023 increased by 7% from the previous quarter and by 4% from than the same quarter last year. The bankruptcies consisted of 1,449 debtors’ applications, which was 11% higher than Q4 2022 and 1% higher than Q1 2022, 323 creditors’ petitions, which was 15% higher than Q4 2022 and 23% higher than Q1 2022. 82% of bankruptcies resulted from debtor applications. This is lower than the proportion seen in previous quarters during the Covid-19 pandemic (approx 90%), but is similar to pre-pandemic values of 75-85%. T

Commenting on the latest figures, Nicky Fisher, President of R3 said “Turning to personal insolvencies, while total numbers have fallen quarter-on-quarter and year-on-year, Debt Relief Order (DRO) numbers have risen to levels not seen since the end of 2018, and Bankruptcy numbers are higher than three months ago and a year ago.”

“The increase in DRO numbers will largely be down to the fact that people with debts of up to £30,000 can now apply for a DRO, following a change in legislation, with those whose debts are higher than this are entering a bankruptcy in an attempt to resolve their situation.”

“Money worries are front of mind for many at the moment, as the price of energy and food, and the current and future health of the economy continue cause concern.”

“We’ve also seen household borrowing increase and an increase in people turn to credit to pay their bills. It’s understandable that people are choosing to go down this route, but it isn’t a sustainable one.”

Andy Nalliah, Personal Insolvency and court work Partner at RSM UK, said “The increasing bankruptcy numbers may be a sign of things to come as creditors adopt a firmer approach to credit management. The Insolvency Service reports that, of the 1,737 bankruptcies in the quarter, 323 have arisen as a result of creditor petitions. While creditor-led bankruptcies remain at a lower percentage (18%) than a typical pre-pandemic quarter, it continues the recent trend as this percentage continues to climb, from 15% in Q3 2022 and 17% in Q4 2022. In terms of directly comparable numbers, the 323 creditor petition bankruptcies in the period represents a 23% increase on the 263 creditor petitioned bankruptcies seen in Q4 2022.”