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Personal and Corporate Insolvencies see a dip in 1st quarter of 2016

Published on:May 3, 2016Author:Andrew Steele

Figures published today by the Insolvency Service show that personal insolvencies in England and Wales decreased slightly by just over 2% to a total of 20,382 for the first quarter to March 2016 compared to the same quarter in 2015. This figure comprises of:

IVA’s 9,916
Bankruptcies 3,744
Debt Relief Orders (DROs) 6,722

Company insolvencies during the March 2016 quarter have reduced by a slightly higher percentage of 3.5% to a total of 3,695 compared to 4,052 for the same quarter in 2015.  This comprises of:

Compulsory Liquidations 804
Creditors Voluntary Liquidations 2,515
Administrations 301
CVA’s 75

Personal Insolvency Changes

Bev Budsworth, managing director of The Debt Advisor, commented: “The decline in bankruptcies is partially due to less petitions by creditors as the government hiked up the debt level over which creditors could petition from £750 to £5,000.  Petitions by debtors are also slightly down but we are likely to see an increase from 6 April 2016 onwards as individuals will now be able to submit petitions online via the gov.uk website.”

The decision to move bankruptcy applications online is one of the reforms aimed to ensure people in financial difficulty get quick and appropriate solutions. It is envisioned that an online application process will encourage people who may otherwise be intimidated by the idea of going to court to apply for bankruptcy.

Bev adds, “Personally I welcome a more simplified and streamlined process to bankruptcy application. We often find that many people are wary of going down the bankruptcy route, even if it’s the most suitable solution for them. I hope the new online service helps change the public’s perception of bankruptcy.”

One debt solution process which has seen an increase is Debt Relief Orders or DRO’s – an increase of 509 again compared with the first quarter of 2015. This again is due to changes by the government who in the latter part of 2015, increased the maximum debt level for DRO’s from £15,000 to £20,000.

FCA sees debt solutions exit industry

Since the FCA took over regulation of debt advice and counselling, more than 200 debt solution practices have exited the industry. The most significant of these is Personal Debt Helpline “PDHL” which went into administration in March 2016 leaving 16,000 customers without a debt solution.  Bev Budsworth adds, “The Debt Advisor is one of 6 companies approached to help PDHL customers. These customers have needed to go through a full assessment and our experience is that at least half need alternative debt solutions including bankruptcy and DRO’s. It’s likely the 2 next quarters will an increase in these numbers.”

Corporate Insolvencies

Compulsory Liquidations have declined by 100 compared to 1st quarter of 2015 and this again is likely to be due to an increase in the cost of petitioning which increased by £220 from 16 November 2015.

Both administrations and CVA’s which are rescue tools have reduced in numbers.  This is due to stability in the economy even though the increase in GDP slowed slightly in the 1st quarter of 2016.  According to analysis by BBC Economics editor Kamal Ahmed, the slowing growth figures are not down to uncertainty about the EU Referendum although he admits many businesses he has spoken to are delaying in investment decisions.  He adds that the economy is still struggling with poor productivity, weak exports and falling industrial production and a decline in construction growth and the underlying factors are more complex than fear about Brexit.

Company Insolvent Liquidations “Creditors Voluntary Liquidations, CVL’s”

The first quarter of 2016 has seen an increase in CVL’s which are appropriate when a company has debts which outweigh its assets and there is no scope for recovery.  During 2009 CVL’s averaged 3,400 per quarter. March 2016 figures were 2,515 up from 2,481 for the same quarter in 2015.

Bev Budsworth adds “Considering that there are more than 580,000 new companies set up each year and that companies have an average life span of two-and-a-half years, the number of formal insolvencies is very low.

“It is estimated that just short of 369,500 companies are dissolved each year. However, dissolution is only relevant for companies that have no debt and have not traded or changed their name in the last three months. There has been an unhealthy growth in directors applying to strike off companies in debt. Companies House provides a step by step guide to the striking off process. Failure to follow this process, which includes sending notifications to shareholders, employees and creditors can mean a fine or possible prosecution.”

If you are struggling with debt there are a range of solutions available. If you are struggling, please do give our team a call on 0333 9999 600 or use our contact form. Our advisors can speak with you about all available debt solutions such as Debt ManagementIVAsBankruptcy and Debt Consolidation.

All debt solutions need to be carefully considered. IVA’s are formal solutions and failure to keep to the terms can result in your IVA failing and you could end up bankrupt.

There is also free debt help and advice available through a variety of debt charities. For more information, we recommend you visit www.moneyadviceservice.org.uk.

The Debt Advisor is authorised and regulated by The Financial Conduct Authority (reg no: 606669). We are also a member of the Debt Resolution Forum and we adhere to their codes and standards.