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Home > News and Reports > Personal insolvencies are on the rise
Nov 6, 2018
Personal insolvencies are on the rise

Business liquidations may be on the decline, but personal insolvencies are on the rise, reveals the latest official figures.

The number of personal insolvencies throughout the UK has increased by four percent in 2018 thus far, largely driven by a rising number of individual voluntary arrangements, or IVAs. Interestingly, the rise in IVAs comes at a time when corporate insolvencies are down by nearly eight percent from 2012.

In all, there were 26,030 personal insolvencies during the third quarter of 2018, 313 more than in the second quarter and 1,014 more than in the first quarter of the year, when personal insolvencies reached their lowest point in five years.

Although debt relief orders and personal bankruptcies have been on the decline, IVAs have reached their highest level in over three years. These specialised arrangements between UK debtors and their creditors allow them to pay what they can reasonably afford over a specific period of time.

Matthew Chadwick, BDO’s head of personal insolvency, stated that rising food and energy costs are straining disposable incomes, which have remained the same since 2009.

In the third quarter of 2018, there were 6,632 DROs, 6,004 bankruptcies, and 13,394 IVAs.

Bankruptcies, which are often the last resort in terms of personal insolvency, have been declining since DROs were introduced in 2009.

Developed specifically for people with less than £15,000 in debt that cannot be realistically paid off, DROs are down 15 percent from 2012 and have reached the lowest number in nearly three years.

IVAs, on the other hand, have increased by more than six percent over the same period in 2012, causing some experts to suggest that the rising tide of people opting to pay back some of what they owe through IVAs is a clear sign that economic confidence is improving.

However, the same experts have also pointed out that this can also be a sign that a growing number of people who were previously juggling their debts have felt an increased financial squeeze, forcing them to negotiate deals with their creditors to avoid complete insolvency.

According to Chadwick, “Whilst bankruptcies and debt relief orders have declined, more people are using individual voluntary arrangements to obtain relief from their debts, suggesting more people are experiencing increased credit pressure. We believe there will be an increase in personal insolvencies in the near future, with bankruptcies most likely rising in the first quarter of 2018.”

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