Personal insolvency numbers fall

Latest figures from the Insolvency Service have indicated that there were 26,758 seasonally adjusted personal insolvencies in Q3 2021, a fall of 1.8% compared to Q2 2021’s figures of 27,252 and a rise of 32.5% compared to Q3 2020 (20,194).

This is the sixth quarter to be wholly affected by the pandemic and associated national measures, and whilst individual voluntary arrangements (IVA) numbers decreased by 9%, they again exceeded the immediate pre-pandemic quarterly average for the fifth quarter in the last six.

The figures showed that there were 1,938 individuals entering either bankruptcy or a debt relief (DRO) (5,735) or an individual voluntary arrangement or IVA (19,085) in the third quarter (Q3) of 2021.

Nicky Fisher, Deputy Vice President at insolvency and restructuring trade body R3 said “The quarterly reduction in personal insolvencies is down to a fall in Individual Voluntary Arrangements and Bankruptcies. However, personal insolvency levels are significantly higher than a year ago, and this is driven by Debt Relief Order numbers increasing to the highest quarterly total since the start of the pandemic, which suggests more people are seeking help to manage their debts.”

“It’s been a difficult three months for consumers and for personal finances. While Government initiatives like the furlough scheme have helped a great many people, they haven’t been able to help everyone.”

“And while the pandemic has led to a number of people being able to save or pay off their debts, there are others who have had to borrow or use savings to pay their bills, and those on lower incomes have been the most badly affected financially.”

“Our message to anyone worried about their finances is simple: seek advice. We know how hard it is to talk about your money worries, but having that conversation before your problems spiral gives you more potential solutions and more time to take a decision about which of these is best for you.”

Andy Nalliah, Personal Insolvency Partner at RSM UK said :This is the least number of bankruptcies in one quarter for over 20 years, since 1989, with the Insolvency Service reporting a 16% quarter on quarter decrease, and a 33% drop on the same quarter last year, which itself was the first full quarter to be wholly affected by the pandemic.”

“Of the 1,938 bankruptcies in the quarter, the Insolvency Service report that only 11% have arisen because of creditor petitions. It should be noted that now that Governmental support has reduced, particularly as regards the cessation of the Furlough Scheme on 30 September, I expect creditors to reassess their options and the forbearance they have demonstrated over the last 18 months will begin to cease.”

“Interestingly, albeit perhaps not surprisingly as the level of debt at which debtors can apply for a DRO increased from £20,000 to £30,000 on 29 June, Q3 saw a significant increase in DRO registrations in the quarter. However, despite there being a 31% increase in DROs in the quarter, and a 29% increase when compared to the same quarter in 2020, the quarterly number of 5,735 remains some way short of the rolling ten-quarter average pre-pandemic average of 6,842 quarterly registrations.”

“Whilst IVA numbers have fluctuated since the start of the pandemic, the numbers for the Q3 were 9% down on those seen in Q2 (before Seasonal adjustment), the rolling 12-month rate is the highest since IVAs were introduced in 1986. Moreover, five of the six quarters wholly affected by the pandemic’s restrictive measures have seen IVA volumes exceed the immediate pre-pandemic average. Further, the continued high numbers of IVAs continue to suggest that despite the well-publicised issues facing our workforces and the question marks of the sustainability of employment, individuals have never been more proactive in addressing their financial health as a means to manage and pre-empt creditor pressure and possibly avoid bankruptcy.”

“Although it cannot be disputed that personal insolvency numbers are reduced due to the pandemic, what is uncertain is the impact of Breathing Space on the personal insolvency numbers. Whilst we should acknowledge the two-month grace period to protect debtors from interest and enforcement action, the Insolvency Service have reported some 15,499 Breathing Space registrations in the quarter. Whether these registrations are precautionary, a precursor to a formal insolvency procedure, or even a way to circumvent an alternate procedure remains to be seen.”

Total individual insolvencies	Bankruptcies	Debt relief orders	Individual voluntary arrangements
2020Q3	20,194	2,876	4,490	12,828
2020Q4	30,870	3,080	4,248	23,542
2021Q1	28,749	2,603	4,163	21,983
2021Q2	27,252	2,302	4,374	20,576
2021Q3	26,758	1,938	5,735	19,085
Percentage change, latest quarter (Q3 2021) compared with:
vs 2021Q2	-2%	-16%	31%	-7%
vs 2020Q3	33%	-33%	28%	49%