Personal insolvency numbers increase by 11%

Latest monthly figures from the Insolvency Service for England & Wales have indicated that personal insolvency figures increased by 11% in June  2024 with a total of 10,395 personal insolvencies registered when compared to last month.

Personal insolvency data consisted of 651 bankruptcies, 4,383 debt relief orders (DROs) and 5,361 individual voluntary arrangements (IVAs).

The increase in overall personal insolvency numbers was driven by increases in DROs, IVAs and bankruptcies. The number of DROs reached a new record high monthly level of 4,383, an increase of 15% from the previous record high set in May. Higher numbers of DROs since April 2024 coincided with the abolition of the £90 administration fee to obtain a DRO from 6 April 2024.

The numbers of bankruptcies and IVAs in the first six months of 2024 were similar to numbers seen in the second half of 2023, while DRO numbers increased following the abolition of the £90 administration fee in April. 

IVA numbers over the past year have been lower than during 2022, which saw a record high annual number. The 5,361 IVAs (after seasonal adjustment) registered in June 2024 was 14% higher than in June 2023 and 8% higher than in May 2024.

The number of bankruptcies in June 2024 was 651, slightly lower than the numbers over the past 12 months. There were 6,970 breathing spaces registered under the Debt Respite Scheme in June 2024. This is 12% lower than in June 2023.

Tom Russell, Vice President of R3, the UK’s insolvency and restructuring trade body said “June 2024 saw a shift in demand for debt and personal insolvency support, with total personal insolvency numbers rising month on month and year on year, while Breathing Space numbers fell. The main driver of the increase in personal insolvencies is an increase in Debt Relief Order (DRO) numbers, which hit their highest level since January 2021 following the removal of the entry fee in April, and Individual Voluntary Arrangement numbers which are up month-on-month and year-on-year. I would expect DRO numbers to increase again next month, as the changes to the amount of debt you can enter a DRO with took effect from June 28th.

“The cost of living is still hitting people hard with prices remaining high even as the annual rate of inflation falls to a more typical level. The price of food, fuel and energy remains an issue for many, and consumers remain worried about the future of the economy, reluctant to make major purchases and cautious with their discretionary spending.

“Although inflation and food inflation are falling and a new energy price cap and the warmer weather will likely lead to a drop in energy bills, people have yet to see the financial benefits of these, or of the overall improvement in the economy.”

The number of individuals entering a personal insolvency procedure has risen for the third successive quarter in Q2 2024. Whilst bankruptcy and individual voluntary arrangement (IVA) numbers dropped in the period when compared to the previous quarter, DRO registrations in the quarter rose by 39%, fuelling the increase in personal insolvency numbers.

Andy Nalliah, Personal Insolvency Partner at RSM UK said “Whilst it is not surprising, it is encouraging that the trend for rising numbers of DRO registrations continues as Q2 2024 saw the highest quarterly amount of DROs on record. This trend is expected to continue now that a consumers’ access to DROs has improved due to the abolishment of the entry fee and the significant increase in entry level thresholds for debt levels and assets.

“In the immediate term, decreases in the quarterly numbers for bankruptcies and IVAs are expected, as many debtors whose circumstances may previously have resulted in a bankruptcy or IVA, are now able to proactively seek and enter a DRO. IVA numbers remain strong, despite the rise in DROs, albeit registrations have dropped 3% in the quarter when compared to Q1 of 2024. Furthermore, they have also fallen 7% when compared to Q2 2023.

“For the first time in four quarters, bankruptcy numbers dropped below 2,000 despite recording 4% more than in the same quarter last year. In actual terms, the reduction represents a decrease of 223 bankruptcies in the period which equates to a 10% quarter on quarter drop. This is not surprising given the trajectory of DROs and, in all likelihood, those debtors who are now entering DROs as opposed to bankruptcy are likely to represent minimal asset cases.

“Despite the drop in bankruptcy numbers, creditor petitions remain high and were responsible for 20% of the bankruptcies in the quarter; a 1% increase on the previous quarter. This continues to speak for the changed attitudes of creditors whose collective approach appears to have shifted to those seen prior to the pandemic.”