Personal insolvency numbers increased by 6% in September

Latest monthly figures from the Insolvency Service for England & Wales have indicated that personal insolvency figures increased by 6% in September 2024 to a total of 10,651 compared to August’s total of 10,046, and increased by 44.5% compared to September 2023’s figure of 7,372.

The personal insolvency figures consisted of 567 bankruptcies, 4,032 debt relief orders (DROs) and 6,052 individual voluntary arrangements (IVAs).

The number of IVAs declined in 2023, reaching the lowest level since 2017. This drop coincided with a number of changes to the wider regulatory landscape. The Financial Conduct Authority introduced a ban on debt packagers receiving remuneration for referrals to IVA firms. Additionally, Recognised Professional Bodies adopted a new Statement of Insolvency Practice in relation to take-on procedures.

In contrast, DRO numbers increased between 2021 and 2023. This rise coincided with the expansion of the eligibility criteria in June 2021 and the introduction of new DRO hubs in February 2023.

The number of bankruptcies in September 2024 was 567, which is lower than monthly numbers seen over the past 12 months. Bankruptcy numbers have declined since 2009, and fell further during the COVID-19 pandemic.  Bankruptcy numbers also increased in 2023 from the 40-year low seen in 2022, but remained at less than half of pre-2020 levels.

In September 2024, 6,052 IVAs were registered, representing a 64% increase from September 2023 and a 14% rise from August 2024. However, the 64% increase was compared to a lower than usual number of IVA registrations in September 2023. The numbers of IVAs approved in August and September 2023 were consistent with surrounding months, indicating that this lower number of registrations in September 2023 resulted from the late registrations of IVAs with the Insolvency Service during this period. The increase in approved IVAs in August 2024 (the most recent month available) compared to August 2023 was 8%.

The number of people entering Debt Relief Orders has remained at record levels, according to the latest Insolvency Service figures, showing personal insolvencies in September were 44 per cent higher than in September 2023 at 10,651.   In September 2024, there were 4,032 DROs, slightly lower than the number registered in August 2024 and 8% lower than the record high (4,376) seen in June 2024. The number of DROs in September 2024 was 91% higher than the long-term (2014 to 2023) monthly average of 2,114. Monthly numbers between April and September 2024 were higher than at any other point since their introduction.

Tim Cooper, President of  insolvency and restructuring trade body R3, and a Partner at Addleshaw Goddard LLP said “Turning to personal insolvencies, the monthly increase is due to a sharp increase in Individual Voluntary Arrangement (IVA) numbers, while the year-on-year increase is due to a rise in IVAs and Debt Relief Order (DRO) numbers – the latter of which can be attributed to the removal of the administration fee for DROs which was introduced in April of this year and the increase in the debt threshold for this process which was introduced in June.

“It’s important to note that the figures published today do not include the Breathing Space numbers for September 2024, and without them it’s hard to get a full picture of the demand for debt advice and support for this month.

“Despite this, it’s clear money worries continue to weigh heavily on consumers, with the health of the economy and their personal finances, and the costs of housing, fuel and energy front of mind for many. Wherever they can, people are looking to save money – looking for bargains on their weekly shop and currently only spending small amounts on treats or non-essentials – and are reluctant to make major purchases as they attempt to save or manage their expenses.

“There will be some hope that the surprising fall in inflation to 1.7% for the first time in a long time may give some interim relief for household budgets. Homeowners in particular may be seeking to benefit from a competitive mortgage market for better fixed rate mortgages, and hoping that this surprising inflation figure is a prelude to further interest rate cuts. However, any optimism would be cautious, as the initial reactions to the inflation figures indicate that there is an expectation they will increase by the end of the year.”

Duncan Lyle, Personal Insolvency Director at RSM UK said “As expected, Q3 has continued to see a rise in DROs following the abolition of the application fee in April 2024, and the subsequent increase in the asset and debt level thresholds. However, Q3 has seen this trend slow with an average 3% month on month decline throughout the quarter, resulting in 5% quarter on quarter growth.

“Debtors’ bankruptcy applications continue to decline, with a 10% reduction on the prior quarter; it may be that increasing numbers of individuals feel confident that they can commit to a structured formal repayment process. Furthermore, with Breathing Space registrations steadily increasing, this could also have affected the number of bankruptcies.

“Whilst there has been a reduction in the number of debtors’ applications, (from 1,515 to 1,365 quarter on quarter) the number of creditor led bankruptcies has risen 11% compared to Q2 2024 In absolute terms, this 11% increase has seen creditor led bankruptcies in the quarter of 430, up from 388 in the previous quarter. Greater pressure on individuals to meet their obligations under personal guarantees has likely contributed to this increase.”

“The number of IVAs recorded in Q1 and Q2 2024, 17,698 and 16,072 respectively, has remained largely unchanged with a total of 17,150 registered in Q3; however, to put into context, whilst Q3 2024 saw an increase of 25% compared to Q3 2023, the number of registrations is still 20% lower than those seen in Q3 2022.”

Matt Hartley, Director of Engagement at the Money Advice Trust, the charity that runs National Debtline, said “We’re continuing to see record levels of people getting Debt Relief Orders, and with personal insolvencies up more widely, it shows the ongoing impact high costs have had on people’s finances.

“It’s vital people with unaffordable debts are able to access the right debt option for them. However, findings from the Insolvency Service show this sadly isn’t always the case, with some people being pushed towards IVAs that weren’t right for them. “circumstances.”