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Consumer bankruptcies up 10% compared to same time last year

Friday, 28th July 2017

There were 22,772 individual insolvencies in Q2 2017, consisting of 12,854 individual voluntary arrangements commonly referred to as (IVAs, 56% of the total), 6,146 debt relief orders (DROs,27%) and 3,772 bankruptcies (17%).

Consumer bankruptcies increase

Although consumer bankruptcies overall fell by 2.5% on the quarter they rose by 4.6% on the year following a change to the application process for debtor bankruptcies. From April 2016 those consumers wishing to petition for their own bankruptcy can only do so online to an adjudicator. Debtor bankruptcies rose 10.3% compared with Q2 2016.

Creditor led petition bankruptcies fell by 13.3% in Q2 2017 compared with Q2 2016 and were at the lowest level in over 14 years.

Individual Voluntary Arrangements (IVAs)

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.

The number of IVAs in Q2 2017 fell 15.6% compared with Q1 2017 (which had the largest quarterly number of IVAs since records began), returning to the level seen in 2016.

Debt Relief Orders (DROs)

A Debt Relief Order is a form of insolvency for people that have a certain amount of debt, little disposable income and few assets. DROs increased by 0.4% on the quarter, but fell by 8.8% on the year, to the second lowest level since changes to eligibility criteria took effect in October 2015.

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

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.

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 DROs IVAs
2009 134,142 74,670 1,831 47,641
2010 135,089 59,194 25,179 50,716
2011 119,943 41,876 29,009 49,058
2012 109,640 31,787 31,179  46,674
2013 100,998 24,571 27,546*  48,881
2014 99,223 20,345 26,688 52,190
2015 79,996 15,828 24,175 39,993
2016 90,930 14,989 26,196 49,745
2017** 47,986 7,640 12,265 28,080

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

** Figures for the second quarter of 2017

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 have decreased this quarter.  It is very distressing to live with unsustainable personal debt so it is important for people to seek advice.”

Source for numbers above www.insolvency.gov.uk



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