Personal insolvencies hit 7 year high

Tuesday 29 January, 2019 Money Advice

The number of people in England and Wales going insolvent due to unaffordable debt hit a seven-year high in 2018, figures show.

Personal insolvencies totalled 115,299, a 16.2% rise on 2017, the Insolvency Service said.

The rise was driven by the use of IVAs, which hit a record level.

Year

Total

Bankruptcies

IVAs

DROs

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

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. Further details can be found here.

There were also increases in Debt Relief Orders last year (up 11.2% compared with 2017), and bankruptcies (up 9.8%).

Last year official data showed unsecured credit – such as credit cards and payday loans – climbed to a record high of more than £205bn while the consultancy PwC said its own measure showed consumer debts rising above £300bn.

The increasing trend in personal insolvencies look set to continue with many low-income households living beyond their means.