Personal insolvencies fell by 9% in 2020

Latest statistics from the Insolvency Service have indicated that there were 111,424 personal insolvencies in 2020, a fall of 9% on 2019’s figure of 121,882. The decrease was driven by a 25% reduction of both bankruptcies and DROs.

The fall in DROs and debtor bankruptcies in the last three quarters of 2020 corresponds with a reduction in applications for these services, which coincided with the announcement of enhanced government financial support for individuals and businesses since the emergence of the coronavirus pandemic.

Colin Haig, President of insolvency and restructuring trade body R3 and Head of Restructuring at Azets, said “The year-on-year decrease in personal insolvency levels is due to a fall in bankruptcy and Debt Relief Order numbers. These processes tend to be a more accurate reference point for levels of serious individual indebtedness, and were consistently lower following the arrival of the pandemic from Q2 onwards than they were during the same period in 2019.”

“The partial closure of the courts and subsequent reduction in capacity has also helped to suppress bankruptcy numbers ever since the first lockdown in March.”

“Despite the fact that personal insolvency numbers decreased in 2020 compared to the year before, this trend doesn’t show the full picture of how the pandemic has affected individuals. In fact, the increase in personal insolvencies between Q3 and Q4 of last year may indicate that the damage the pandemic has wrought on many people’s finances is finally starting to translate through to the official insolvency figures.’

“The pandemic has hit people’s finances hard. While many have been able to save money and repay debts, there are millions more who have had to borrow to get through it, and who are increasingly vulnerable to financial problems caused by unexpected issues like missed benefit payments, unexpected bills, or redundancy.”

“Government initiatives like the furlough scheme, coupled with payment holidays from banks and other lenders, have provided a critical safety net for many, but sadly these can’t last forever and haven’t been able to help everyone.”

“Despite the scale of support that has been available, unemployment has already increased to a level not seen since 2016 as businesses attempt to navigate the commercial turbulence the pandemic has caused, and consumer confidence remains low as people worry about their financial position and the current and future health of the economy.”

“There is some good news for people in debt on the horizon, with the breathing space scheme due to be introduced in May. This will offer people a chance to talk to a debt adviser about their options, free from creditor pressure.”

“In the meantime, we cannot overstate how important it is for anyone with money worries to speak to a reputable and professional source as soon as they can, as debt problems only get worse as time goes on.”