The number of people who became insolvent in England and Wales in the first quarter of 2018 was 27,338. This consisted of 16,675 Individual Voluntary Arrangements (IVAs, 61% of the total). 6,524 Debt Relief Orders (DROs, 24%) and 4,188 consumer bankruptcies (15%).

Individual Voluntary Arrangements (IVAs)

The number of IVAs in Q1 2018 rose 8.3% compared with Q4 2017.This was the largest quarterly number of IVAs since they were introduced in 1987.

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. Read more on Individual Voluntary Arrangement (IVA) Information / Advice

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

DROs increased by 1.3% on the quarter and by 6.9% on the same quarter in 2017.

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. read more Debt Relief Orders (DROs).

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 falling consumer bankruptcy numbers

Bankruptcies overall rose by 9.6% on the quarter and also by 9.3% on the year. Bankruptcies on both debtors’ own applications and creditors’ petitions increased on the quarter and on the same corresponding quarter in 2017.

Whilst some debt advisors believe the high cost to the consumer in England and Wales to go bankrupt is distorting the numbers another major factor was the introduction of Debt Relief Orders (DROs) in 2009, combined this is likely to have affected the numbers. Another point is the recent change in the amount the debtor must owe before a creditor can petition, this has now risen from £750 to £5,000. Read more consumer bankruptcy and how to apply on line

Note in the table below the numbers going bankrupt in 2009 compared to 2010 - 2017.

The most common insolvency procedure for consumers?

Of the 99,196 people who became insolvent in 2017, 59.7% had IVAs, 25.1% had DROs and 15.2% had bankruptcy orders. In 2016 IVAs comprised 55% of all individual insolvencies, compared to 50% in 2015 and 53% in 2014.

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 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 numbers for 2016, 2017 and 2018 average 15,000.

* For the first time, in 2013, there were more DROs than bankruptcies. ** Figures for the whole of 2017. *** Figures for first quarter of 2018.

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

Source for numbers above The Insolvency Service