Personal insolvencies rate continues to rise

The number of individuals entering a personal insolvency procedure shows few signs of slowing as the rolling 12-month insolvency continues to rise, representing the highest Quarter 2 figure since 2010.

The figures, released by the Insolvency Service today, reveal that there were 30,936 individuals entering either bankruptcy (4,228), a debt relief order (6,752) or an individual voluntary arrangement or IVA (19,956) in the second quarter of 2019. 

Further, the statistics show that 1 in 382 adults entered a personal insolvency procedure in the rolling 12 months to the end of Quarter 2, a higher ratio than the 1 in 388 adults in the rolling 12 months to the end of Quarter 1. 

Alec Pillmoor, personal insolvency partner at RSM said: 

'As we predicted, following the near decade long highs of 2018 and Q1 of 2019, personal insolvency numbers remain high and remain comparable to the first quarter of 2019, resulting in an increase in the rolling 12-month insolvency rate.

'With near full employment and low interest rates, you would expect personal insolvency rates to fall, but in fact, insolvency levels have risen by 7.2 per cent when compared with the same quarter last year. This suggests that many people continue to be over-optimistic when it comes to estimating their ability to meet repayment demands as they fall due.’

'Of greatest concern is the rise in personal insolvencies among young adults. Back in 2016, insolvencies among adults under 25 only accounted for one per cent of the total. Our research shows that this has risen to around 6.5 per cent today. In this climate of low interest rates and relatively easy access to credit, it is entirely feasible that young people without financial experience or literacy may be more susceptible to the temptations of easy money.

'Furthermore, debt charities have also raised concerns about the rise in sub-prime credit cards being targeted at those with low credit scores. These can have relatively high APRs when compared to other short-term credit alternatives and serve to further the plight of those with limited understanding of how easy it is to rack up unsustainable debt.

'A note of caution for consumers in general however. Given the current weakness of the pound and Brexit related economic uncertainty, many consumers may wish to give closer consideration to their holiday spending this summer to avoid getting into trouble further down the line.'