The Insolvency Service has published its latest analysis on personal insolvencies for Q3 2020 which indicates that. numbers decreased to 19,783 in Q3 2020, down 40% on Q2 2020, and down 37% on Q3 2019.
The quarterly decrease in personal insolvencies was mainly driven by a sharp drop in Individual Voluntary Arrangements (IVAs), although a registration issue meant there was an abnormally high number of IVAs recorded in Q2 2020. Debt Relief Orders fell 7%, while Bankruptcies rose by 10% in Q3 compared to Q2.

The rate of individual insolvency for the 12 months ending Q3 2020 also fell to 23.2 per 10,000 adults in comparison to the 12 months ending Q2 2020 and the 12 months ending Q3 2019 (rate of 25.9 and 27.4 per 10,000 adults respectively).

The decrease in the overall number of individual insolvencies in the latest quarter was driven by individual voluntary arrangements (IVAs). The decrease in IVAs was somewhat artificial – a single provider submitted a large number of late registrations in May 2020 resulting in a high volume of IVAs in Q2 2020.

Commenting on the figures R3 President Colin Haig said “The fall in personal insolvencies over Q3 was driven by a decrease in IVAs and Debt Relief Orders compared to Q2, although bankruptcies increased compared to the previous quarter’s figures. Compared with the same quarter in 2019, all types of personal insolvency procedure saw a steep drop in numbers.”“This shows the Government’s support measures have continued to provide a safety net for many individuals. The furlough scheme has ensured a number of people remained in employment even if they were not working during that time, which has contributed to the reduction in insolvency levels. However, the recent extension of the furlough scheme offers a lower percentage of wages than its first iteration, which, although a lifeline for many, may not be enough for a lot of those affected to pay their bills.”

“Despite this, we know people are worried about their future financial health – and that of the economy. Unemployment is at the highest level it’s been for three years – and expected to rise again in the short-term – and we have seen the biggest level of quarterly redundancies on record.”

“Although consumer confidence increased quarter on quarter, it’s still much lower than it was this time last year – and before the pandemic. Consumer spending is much lower than at the same time last year, with outstanding credit card balances well below where they were 12 months ago, while mortgage approvals are at their highest level since 2007, following the stamp duty holiday.”

“A lot of people in higher-income households have been stockpiling cash, with reduced opportunities to spend on travel or going out, while at the other end of the scale, people in low-income households are in many cases finding it very hard to get by, with reduced incomes leading to negative monthly budgets.”

“This slowdown in non-mortgage spending is understandable as many people are just one change in circumstances away from being unable to keep on top of their debts – and it would be fair to say many are aware that the risk of a change in circumstances is increased in the current climate.”

“It can’t be said enough – turning to a qualified and professional source of advice if your finances take a turn for the worse is always a good idea. The earlier you seek advice, the more options you have to try and resolve the issues you face.”