Personal insolvencies continue downward trend in Q3 2023
31 October 2023
The number of individuals entering personal insolvency in Q3 2023 has dropped for the fourth consecutive quarter and is at the lowest level since Q3 2020. This fall is heavily fuelled by a significant reduction in individual voluntary arrangement (IVA) registrations for the second successive quarter.
The seasonally adjusted figures, released today by the Insolvency Service, reveal that there were 24,418 individuals entering either bankruptcy (2,015), a debt relief order or DRO (8,438) or an IVA (13,965) in Q3 2023.
IVA numbers were down 17% on the previous quarter and dropped 35% when compared to the same quarter in 2022. DRO numbers continue to rise, increasing 18% in the period and by 49% when compared to the same quarter in 2022.
Interestingly however, bankruptcy numbers rose for the third successive quarter, this time by 8% on the previous quarter, and recorded the highest number since Q2 2021.
Andy Nalliah, personal insolvency partner at RSM UK, said: ‘For the second successive quarter, IVA registrations have dropped significantly when compared against both the previous quarter and the same quarter last year. This suggests the trend of higher-than-normal IVA registrations, which has generally occurred since the onset of the pandemic, has continued to slow. This remains unsurprising as debtors lack the medium-term confidence in their own ability to service the financial commitments associated with an IVA. Many people will be affected by hiked interest rates as their fixed-term mortgages come to an end and this will be a key driver behind the 35% drop in IVAs compared to the same quarter last year.’
‘Despite the decrease in IVA registrations being responsible for the decline in personal insolvency numbers over the last two quarters, bankruptcy and DRO numbers have increased in three and four consecutive periods respectively. The rise in bankruptcy numbers is further evidence of a change in emphasis for the provision of credit and debt recovery. This is corroborated by the Insolvency Service who report that of the bankruptcies in the quarter, 24% have arisen because of creditor petitions; this is up from 22% in the previous quarter and 16% in Q3 2022. Going forward, we expect this percentage to remain higher than recent quarters as creditors continue to chase repayments.’
He added: ‘Unsurprisingly DRO numbers remain high, and the quarterly number of 8,438 registrations represents a significant 17% increase on the previous quarter and a huge 49% increase on the same quarter last year. When compared against pre-pandemic numbers, and perhaps more pertinently against DRO numbers prior to the eligibility thresholds being increased in summer 2021, it is likely that the increase in DRO registrations represent debtors at the higher end of the criteria and furthermore, consist of those who would otherwise have become bankrupt; perhaps explaining, at least in part, the lower levels of bankruptcy numbers when compared to pre-pandemic levels. A further reason for the rise in DROs throughout 2023 and particularly in this last quarter, per the Insolvency Service, is the opening of the new DRO hubs earlier this year. Given the current trend, we expect elevated levels of DROs to continue in Q4 2023.’
The seasonally adjusted figures, released today by the Insolvency Service, reveal that there were 24,418 individuals entering either bankruptcy (2,015), a debt relief order or DRO (8,438) or an IVA (13,965) in Q3 2023.
IVA numbers were down 17% on the previous quarter and dropped 35% when compared to the same quarter in 2022. DRO numbers continue to rise, increasing 18% in the period and by 49% when compared to the same quarter in 2022.
Interestingly however, bankruptcy numbers rose for the third successive quarter, this time by 8% on the previous quarter, and recorded the highest number since Q2 2021.
Andy Nalliah, personal insolvency partner at RSM UK, said: ‘For the second successive quarter, IVA registrations have dropped significantly when compared against both the previous quarter and the same quarter last year. This suggests the trend of higher-than-normal IVA registrations, which has generally occurred since the onset of the pandemic, has continued to slow. This remains unsurprising as debtors lack the medium-term confidence in their own ability to service the financial commitments associated with an IVA. Many people will be affected by hiked interest rates as their fixed-term mortgages come to an end and this will be a key driver behind the 35% drop in IVAs compared to the same quarter last year.’
‘Despite the decrease in IVA registrations being responsible for the decline in personal insolvency numbers over the last two quarters, bankruptcy and DRO numbers have increased in three and four consecutive periods respectively. The rise in bankruptcy numbers is further evidence of a change in emphasis for the provision of credit and debt recovery. This is corroborated by the Insolvency Service who report that of the bankruptcies in the quarter, 24% have arisen because of creditor petitions; this is up from 22% in the previous quarter and 16% in Q3 2022. Going forward, we expect this percentage to remain higher than recent quarters as creditors continue to chase repayments.’
He added: ‘Unsurprisingly DRO numbers remain high, and the quarterly number of 8,438 registrations represents a significant 17% increase on the previous quarter and a huge 49% increase on the same quarter last year. When compared against pre-pandemic numbers, and perhaps more pertinently against DRO numbers prior to the eligibility thresholds being increased in summer 2021, it is likely that the increase in DRO registrations represent debtors at the higher end of the criteria and furthermore, consist of those who would otherwise have become bankrupt; perhaps explaining, at least in part, the lower levels of bankruptcy numbers when compared to pre-pandemic levels. A further reason for the rise in DROs throughout 2023 and particularly in this last quarter, per the Insolvency Service, is the opening of the new DRO hubs earlier this year. Given the current trend, we expect elevated levels of DROs to continue in Q4 2023.’
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