Nearly two thirds of insolvency professionals who expect personal insolvencies to rise this year believe the increase will kick in between October and December, a study has found.
R3, the trade body for insolvency, restructuring, advisory and turnaround professionals, conducted a member survey and found that most insolvency practitioners (IPs) anticipate the rise to emerge only at the end of 2020, with business failure being a key trigger. A total three in 10 of IPs surveyed think the rise will occur later, between January and March of 2021.
The study also found that two in five (41%) expect the number of personal insolvencies to be significantly higher than last year’s figures.
According to R3, three quarters of insolvency professionals (74%) believe the rise in insolvencies will be triggered by personal debt related to business failure. Half said credit card debt was likely to be a trigger, and 35% said unsecured bank loans or overdrafts.
Mark Sands, chair of R3’s personal insolvency committee, said: “It’s not uncommon for a business insolvency to lead to an individual becoming insolvent, especially if the person in question has agreed to take on liability for a business’s debts via a personal guarantee as part of an attempt to turn it around.”
Of the respondents, a third said that an early introduction of the planned breathing space would be most useful. Earlier this month, the government announced the breathing space scheme will roll out in May 2021.
Sands added: “Getting on with introducing breathing space would have two major benefits. It would provide anyone who is unable to pay their debt with time to develop and agree a sustainable approach to managing them, and, hopefully would encourage more people to seek reliable, professional advice about their debts.”