Credit, Collections & Insolvency News
Latest statistics quarterly figures from the Insolvency Service for England & Wales have indicated that personal insolvencies numbers increased by 23.3% compared to May 2021’s figure of 8,496 and increased by 11.2% to 10,476 in May 2022 compared to 9,417 in April.
There were 2,030 DROs and 566 bankruptcies.
For individuals, 566 bankruptcies were registered, which was 23% lower than in May 2021 and 61% lower than May 2019. There were 2,030 Debt Relief Orders (DROs) in May 2022, which was 33% higher than in May 2021 but 11% lower than the pre-pandemic comparison month (May 2019). The increase compared to last year is linked to changes to the eligibility criteria on 29 June 2021 including an increase in the level of debt at which people can apply for a DRO from £20,000 to £30,000. In the 11 months since the change in DRO eligibility criteria, an estimated 7,787 individuals have had a DRO approved who would not have previously been eligible.
The number of DROs in May 2022 was 33% higher than in May 2021, but 11% lower than in May 2019. Changes to DRO eligibility came into effect on 29 June 2021, including an increase in the level of debt at which people can apply for a DRO from £20,000 to £30,000. The increase in the number of DROs registered since June 2021 is likely to have been caused by this expansion of the eligibility criteria.
In the 11 months since the change in DRO eligibility criteria, an estimated 7,787 individuals have had a DRO approved who would not have previously been eligible. This means that (assuming no changes to application behaviour) the number of DROs is approximately 55% higher than it would have been without the change to criteria. Numbers of DROs that meet the new and old eligibility criteria are considered an estimate. This is because it is based on the recorded total debts, income and asset values in each case. Information on the value of assets is dependent on individual declarations and may be incomplete or unreliable in some cases.
There were, on average, 7,812 IVAs registered per month in the three-month period ending May 2022, which is 6% higher than the three-month period ending May 2021, and 10% higher than the three-month period ending May 2019. IVA numbers have ranged from around 6,300 to 7,800 per month over the past year.
There were 5,749 Breathing Space registrations in May 2022, which is 6% lower than the number registered in May 2021. 5,638 were Standard breathing space registrations, which is 7% lower than in May 2021, and 111 were Mental Health breathing space registrations, which is 136% higher than the number in May 2021.
The bankruptcies were made up of 497 debtor applications and 69 creditor petitions. Monthly bankruptcy numbers between July 2021 and May 2022 were lower than the numbers in 2020, which were already lower than pre-pandemic levels. Bankruptcies were 23% lower than in May 2021. Debtor applications were 23% lower and creditor petitions were 19% lower than May 2021.
Compared to May 2019, total bankruptcies were 61% lower; debtor applications were 57% lower and creditor petitions were 77% lower.
Christina Fitzgerald, President of R3, the insolvency and restructuring trade body said “On the personal insolvency side of things, the monthly increase has mainly been driven by a rise in the number of people entering an Individual Voluntary Arrangement or Debt Relief Order, while bankruptcies have also risen slightly since last month.”
“This suggests that while the economic challenges the UK is facing are taking a toll on individuals, that impact is largely being felt by those on lower incomes given there has only been a slight increase in the number of people entering a bankruptcy process. Overall personal insolvencies are higher this month than in May 2021, but lower than in 2020 and slightly lower than in 2019.”
“However, the situation is still tough for people’s personal finances. While unemployment is low and job vacancies are high, wages haven’t kept pace with inflation, and many people remain very worried about how they’ll manage to afford food, fuel and energy as all three of these necessities become increasingly expensive.
“People’s finances have been affected by the economic fallout from the pandemic, and combined with the increased cost of living, there are potentially a lot of people who are vulnerable to the kind of unexpected shocks that can lead to them becoming insolvent.”