Personal insolvencies remain 16 percent up year-on-year

According to The Insolvency Service, the fall was largely driven by a decrease in the number of individual voluntary arrangements (IVAs), though both debt relief orders (DROs) and bankruptcies fell slightly from Q4 2018.

In all, there were 115,319 personal insolvencies in 2018.

The quarter-on-quarter decrease in total individual insolvencies in the first quarter of 2019 was largely driven by a decrease in IVAs, The Insolvency Service said. Over the period, there were 20,325 IVAs, a decrease of 11.4 percent compared to a record high in final quarter of 2018. The fourth quarter of 2018 had seen the highest quarterly level of IVAs since their introduction in 1987. Compared with the same quarter last year, IVAs increased by 23.7 percent.

Both DROs and bankruptcies decreased slightly over the first quarter of 2019 by 1.6 percent and 0.6 percent respectively. It was the first quarter-on-quarter fall in DROs for almost two years.

Compared to the same quarter last year, bankruptcies were broadly flat, while DROs increased by 6.5 percent. IVAs accounted for 64.5 percent of total individual insolvencies followed by DROs (22.3 percent) and bankruptcies (13.2 percent). Since third quarter of 2011, IVAs have been the most common individual insolvency while bankruptcies fell after the introduction of DROs in 2009.

Richard Haymes, financial difficulties expert at Equifax, said the level of personal insolvencies should spark increased regulatory scrutiny from the Financial Conduct Authority (FCA).

“The drivers for the general trend of rising insolvencies, such as soaring credit card debt – now at £2,649 per household – economic stagnation and the problematic roll out of Universal Credit remain, but other industry developments are directly impacting volumes, such as the re-emergence of a number of historic major players offering IVAs.

“These companies, which also offer debt management services, have transformed their businesses following the first FCA thematic review in 2015. Having met the regulatory requirements, they are once again in growth mode. Against this rising tide, debt charities lack the financial resources they need to market their non-commercial, free of charge services. These include alternatives to IVAs such as debt relief orders, which can often be more appropriate for consumers.”

Stuart Frith, president of insolvency and restructuring trade body, R3: “A quarterly fall in insolvency numbers was almost inevitable given the one-off size of the increase at the end of last year, although we still have levels of personal insolvency last seen almost a decade ago.

“It’s really important to remember, however, personal insolvency numbers don’t necessarily tell us how many people are insolvent, but rather how many people are able to access a personal insolvency procedure to resolve their debts.

“Better indicators of serious indebtedness are the numbers of bankruptcies and debt relief orders. These processes help people who are unable to make almost any kind of contribution to repaying their debts and have been slowly creeping up over the last year.”