Rate of personal insolvencies continues to rise

The number of individuals entering a personal insolvency procedure shows few signs of slowing as the rolling 12-month insolvency rate rose further in the last quarter, representing the highest quarter one figure since 2010.

The figures, released by the Insolvency Service, reveal that there were 31,527 individuals entering either bankruptcy (4,162), a debt relief order (7,040) or an individual voluntary arrangement or IVA (20,325) in the first quarter in 2019. 

Further, the statistics show that 1 in 388 adults entered a personal insolvency procedure in the rolling 12 months to the end of quarter 1, up from 1 in 401 adults in the 2018 calendar year. 

Alec Pillmoor, Personal Insolvency Partner at RSM said: 

'As we predicted, following a record breaking 2018, personal insolvencies have continued to increase and have exceeded 30,000 in quarter one for the first time since 2011 and recorded the highest quarter one total since 2010.

‘This has resulted in an increased individual insolvency rate, for the rolling 12 months to the end of the first quarter in 2019, which falls above 1 in 400 for the first time since the third quarter of 2012. Indeed, the insolvency rate of 1 in 388 is up from 1 in 401 adults in the 2018 calendar year and is a rate which worryingly, we do not anticipate slowing anytime soon.

‘Whilst both bankruptcy and debt relief order numbers remain consistent with the quarterly figures from throughout 2018, it is notable that IVA numbers remain high, at 20,325 for the quarter. This is only the second time IVA numbers for a quarter have exceeded 20,000 and follows the record-breaking final quarter of 2018.

'Such high volumes of IVAs is in part, a likely reflection of the recent increase in credit card defaults because whilst retail sales figures show a sustained month on month growth throughout the first three months of 2019, it is likely that consumers renewed confidence in their spending power is aided by borrowing and consumer credit.

‘As we pass the 10-year anniversary of DROs, what is interesting is the changing face of personal insolvency. In the quarter immediately prior to the introduction of DROs, being the first quarter of 2009, IVAs accounted for 36 per cent of personal insolvencies, they now account for 65 per cent; with bankruptcies and DROs accounting for 13 per cent and 22 per cent respectively.’

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