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Consumer insolvency reaches seven year high as IVA numbers break all records

Tuesday, 29th January 2019

The number of people who became insolvent in England and Wales in 2018 was 115,219 up 16.2% on 2017, reports The Insolvency Service, with the highest number of annual insolvencies since 2011. Consumer insolvencies combine Individual Voluntary Arrangements (IVAs), Bankruptcy and Debt Relief Orders (DROs)

Individual Voluntary Arrangements (IVAs)

There were 71,034 IVAs in 2018, (59,220 - 2017) a 19.9% increase on the year before, and the highest annual level recorded since IVAs were first introduced in 1986.

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

Consumer bankruptcy numbers

There were 16,582 bankruptcy orders in 2018 (15,082 - 2017), a 10% increase on the year before. Orders on the application of both the debtor and creditor led rose by 10% respectfully.

This annual number of bankruptcies is still low when compared to 2009 when they peaked at 74,000.

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. 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

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

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

There were 27,683 DROs in 2018 (24,894 DROs in 2017), which was an increase of 11% on the year before.

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 most common insolvency procedure for consumers

Of the 115,299 people who became insolvent in 2018, 62% had IVAs (60% in 2017), 24% had DROs (25% in 2017) and 24% had bankruptcy orders (15% in 2017).

In the 12 months ending Q4 2018, the rate of insolvency was 1 in 401 adults (24.9 per 10,000 adults).

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.

 

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 80,404 15,845 40,384 24,175
2016 90,657 15,044 49,417 26,196
2017 99,219 15,105 59,220 24,895
2018** 115,299 16,582 71,034 27,683
2019* 00000 00000 00000 00000


* For the first time, in 2013, there were more DROs than bankruptcies. ** Figures complete for 2018. *** First quarter of 2019 dues April 2019.

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 the insolvency numbers above The insolvency Service

 

 

 

 

 

 

 

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