Quarterly Personal insolvencies fall by 4.9%

Latest quarterly figures from the Insolvency Service for England & Wales have indicated that personal insolvencies numbers  decreased by 4.9% to 27,927 in Quarter 3 (Q3) 2022 compared to 29,361 in Q2, and were 2.3% higher than Q3 2021’s figure of 27,302. Q3 2022’s figures fell 12.4% when compared to Q3 2019’s total of 31,864.

Individual voluntary arrangements (IVAs) were the most common individual insolvency procedure (74% of cases), followed by DROs (20% of cases) and bankruptcies (6% of cases). IVAs make up a larger proportion of individual insolvencies than in the past and bankruptcies a much smaller proportion. Five years ago (Q3 2017), IVAs made up 61% of individual insolvencies, compared to 24% for DROs and 14% for bankruptcies, while ten years ago, 43% of individual insolvencies were IVAs, compared to 28% for DROs and 29% for bankruptcies.

The number of DROs decreased by 5% in Q3 2022 compared with the previous quarter, and was 3% lower than in the same quarter last year.

After seasonal adjustment, the number of bankruptcies registered in Q3 2022 increased by 4% from the previous quarter but was 13% lower than the same quarter last year. Bankruptcies consisted of 1,433 debtors’ applications, which was 4% higher than Q2 2022 but 16% lower than Q3 2021, 291 creditors’ petitions, which was 1% higher than Q2 2022 and 13% higher than Q3 2021.

84% of bankruptcies resulted from debtor applications. This is lower than the proportion seen in previous quarters during the COVID-19 pandemic (approx 90%), but is similar to pre-pandemic values of 75-85%. The numbers of debtors’ applications and creditors’ petitions were both amongst the lowest seen since 1998 when data on petition type started to be captured.

There were 18,347 Breathing Space registrations in Q3 2022. This is 18% higher than in Q3 2021. Of the 18,347 Breathing Space registrations, 18,050 were Standard breathing space registrations and 297 were Mental Health breathing space registration

Christina Fitzgerald, President of insolvency and restructuring trade body R3, said “Although personal insolvency numbers have fallen compared to the last quarter due to a decline in Individual Voluntary Arrangement (IVA) and Debt Relief Order (DRO) numbers, the figures are still higher than they were this time last year because of an increase in the number of people entering an IVA.”

“This, coupled with the increase in bankruptcies between this and the last quarter, suggests that the cost of living crisis is starting to be reflected in personal insolvency numbers, as people turn to personal insolvency processes to help resolve their financial issues.”

“People are very worried about money right now. Prices are rising at the fastest rate of 40 years and increased costs of heating, eating, and fuelling vehicles are a serious and ongoing concern for many.”

“While unemployment is down, wages haven’t kept pace with inflation and more people are borrowing money as the pounds in their pockets don’t go as far as they did 12 months ago.”

“Increased borrowing can put people at risk of insolvency as it only takes a missed payment, a cut in hours at work or an unexpected bill to turn a challenge into a problem and move someone from being on a financial knife edge to being unable to pay their debts.”