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Consumer bankruptcy numbers fall to lowest level since 1990 but IVAs increase

Wednesday, 1st February 2017

The number of people who became insolvent in England and Wales in 2016 was 90,930, a 13.1% rise on 2015 but still lower than the figure each year from 2006 to 2014 reports The Insolvency Service.

The falling bankruptcy numbers

There were a total 14,989 consumer bankruptcy orders in 2016, compared to 15,797 the year before. This is the lowest numbers since 1990 when there were just 13,987. Whilst some debt advisors believe the high cost to the consumer in England and Wales to go bankrupt is a major factor the introduction of debt relief orders (DROs) in 2009 is likely to have affected the numbers as well as the recent change in the amount the debtor must owe before a creditor can petition as this has now risen from £750 to £5,000.

Note in the table below the numbers going bankrupt in 2009 compared to 2010 - 2016.

The cost to go bankrupt England v Scotland

In 2009 the cost to petition for bankruptcy in England was £495, this increased by 37% in 2010 and as from 21 July 2016, this has increased further to £680. Meanwhile in Scotland it is just £200.

The impact of Debt Relief Orders (DROs) on bankruptcy numbers

There were 26,196 DROs in 2016; this was 8.4% increase on the year but the lowest annual total when compared with the years 2011 - 14.

Debt Relief Orders were introduced in 2009 and are another form of insolvency for those who have unsecured debts below £20,000, not a house owner, assets below £1,000 and under £50 pcm in disposable income. Those who propose a DRO do not pay anything towards their debts other than the admin fee of £90 and if their circumstances do not change after one year from the commencement of the DRO they are debt free.

Those consumers that qualify for a DRO would find this a more attractive scenario than the normal bankruptcy process. For the first time, in 2013, there were more DROs than bankruptcies.

Individual Voluntary Arrangements (IVAs)

There were 49,745 IVAs in 2016. Having fallen in 2015, IVAs rose by 23.2% in 2016 to return to the level seen from 2009 to 2014.

An IVA is a legally binding agreement between a consumer and his or her creditors, usually store and credit cards, bank loans and overdrafts and is supervised by an insolvency practitioner. With an IVA you have more control over your assets and are less likely to lose your home, but it involves paying some of your debts usually over a period of five years and any remaining debts left in the IVA will be written off.  

In 2016 IVAs comprised 55% of all individual insolvencies, compared to 50% in 2015 and 53% in 2014.

The fall in bankruptcy numbers after the 2010 increase in fees

Note in the table below that in 2009 (the year before the increase in fees) the number of those going bankrupt was close to 75,000 and that the number for 2016 was just below 15,000. 


Year Total Bankruptcies IVAs DROs
2009 134,142 74,670 47,641 1,831
2010 135,089 59,194 50,716 25,179
2011 119,943 41,876 49,058 29,009
2012 109,640 31,787 46,674 31,179
2013 100,998 24,571 48,881 27,546*
2014   99,223 20,345 52,190 26,688
2015   79,996 15,828 39,993 24,175
2016**   90,930 14,989 49,745 26,196

* For the first time, in 2013, there were more DROs than bankruptcies.

** Figures for the whole of 2016

We have a full list of all the consumer insolvencies since records began back in 1960, you can view them here Insolvency figures since 1960

Although some commentators see the falling bankruptcy numbers as a sign the economy is picking up, along with some improvement to consumer finances, some debt counsellors will argue that they are seeing many that need to go bankrupt but simply cannot afford the fee.

Insolvency Service chief executive Sarah Albon said:

"Personal insolvencies increased last year for the first time since 2010, however the total was still the second lowest number in the last 11 years. It is very distressing to live with unsustainable personal debt so it is important for people to seek advice."

Andrew Tate, president of insolvency and restructuring trade body R3, says:

“It’s important to remember that the government’s personal insolvency statistics do not include the thousands of people who are still in non-statutory debt management plans. These are now regulated by the FCA, but no numbers are published which would help us understand their usage.”

“And while a debt management plan may be suitable for some users, others may be better suited to a formal insolvency procedure that they cannot access. To enter bankruptcy, for example, costs £680 in up-front government fees. Making these fees payable by instalments over the course of a bankruptcy would help those who need to access a formal insolvency procedure more suited to their situation.” Full comment from R3 can be found here

Source for numbers above www.insolvency.gov.uk




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