Personal Insolvency fall to lowest level since Q3 2020

28 July 2023
The number of individuals entering a personal insolvency procedure has dropped to its lowest quarterly level since Q3 2020. This is heavily fuelled by a reduction in IVA registrations in the quarter.

The seasonally adjusted figures, released today by the Insolvency Service, reveal that there were 26,390 individuals entering either bankruptcy (1,826) a debt relief order or DRO (7,106) or an individual voluntary arrangement or IVA (17,458) in Q2 2023. 

IVA numbers were down 12% on the previous quarter and dropped 22% when compared to the same quarter in 2022. For the second quarter running, DRO numbers broke the 7,000 barrier, increasing 1% in the period and by 23% when compared to the same quarter in 2022.

Interestingly however, bankruptcy numbers rose for the second successive quarter and recorded the highest number since Q4 2021.

Andy Nalliah, personal insolvency partner at RSM UK said: ‘IVA registrations have dropped significantly when compared against both the previous quarter and the same quarter last year. This could suggest the pandemic trend of higher-than-normal IVA registrations is now slowing. Furthermore, despite a recent slowdown in inflation, energy prices and the cost of groceries, the drop in IVAs could reflect the debtor’s lack of confidence in their own ability to service the financial commitments associated with an IVA. 

‘Many people will be starting to feel the bite of hiked interest rates as their fixed term mortgages come to an end and this could be a key driver behind the 22% drop in IVAs compared to the same quarter last year.

‘On the flip side, albeit on a lesser scale, bankruptcy numbers have risen by 4% in the quarter and by 11% when compared to the same quarter last year. This is a further sign of creditors acting upon their previously re-evaluated credit and debt recovery strategies.

‘This aligns with the Insolvency Service’s bankruptcy figures for the quarter, which found 19% have arisen because of creditor petitions; up from 18% in the previous quarter and 16% in the same quarter in 2022. Furthermore, the Insolvency Service report that the actual number of creditor petitions in the quarter is up 10% on the previous quarter and 30% on the same quarter last year.

‘Unsurprisingly DRO numbers remain high, and the quarterly number of 7,106 registrations represents a 1% increase on the previous quarter and a huge 23% 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 the summer of 2021, it is likely that the increase in DRO registrations is those at the higher end of the criteria. By extension therefore, it is likely many of these DRO registrations are for debtors who would otherwise have become bankrupt; perhaps explaining in part the lower levels of bankruptcy numbers.’