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PERSONAL INSOLVENCIES 10,000+ HIGHER IN 2016

Published on:February 1, 2017Author:Lucyna Rynkiewicz-Jones

Personal Insolvencies decreased in the 4th quarter but increased on the year

Figures published last week by the Insolvency Service show that there has been a decrease in the overall number of personal insolvencies for the 4th quarter of 2016. The numbers of personal insolvency decreased from 24,251 for the 3rd quarter of 2016 to 22,852 in the quarter ending December 2016.

December Quarter Personal Insolvencies

Type of Procedure 3rd quarter 2016 4th quarter 2016 Movement
Individual Voluntary Arrangement “IVA’s” 13,917 12,823 5.1%▼
Bankruptcies 3,844 3,786 2.1.% ▼
Debt Relief Orders “DRO’s” 6,490 6,243 3.8% ▼
Total Numbers 24,251 22,852 4.3% ▼

Despite the 5.1% reduction in the amount of IVA’s, in the 4th quarter of 2016 compared to quarter 3 2016, IVA figures are still 21.7% higher in quarter 4 2016 than the same quarter in 2015.

Total Personal Insolvencies

However, the total number of personal insolvencies in 2016 of 91,038 is materially higher than the total of 80,847 for 2016.

IVA’s

The 12% increase relates mainly to almost 10,000 extra IVA’s being approved in 2016. This has been driven by the demise of significant numbers of debt management companies who have failed to achieve approval from the Financial Conduct Authority or have chosen to exit the industry due to the additional compliance burden.

DRO’s

Debt Relief Orders “DRO’s” or “mini Bankruptcies” during 2016 totalled 26,196 – an increase of just over 2,000 from the 2015 total figures. The criteria for the DRO maximum debt level increased from £15,000 to £20,000 in October 2015 which may explain some of the increased numbers. The liberation of thousands of individuals from debt management plans will also have contributed.

Bankruptcies

Bankruptcy numbers have further declined marginally to 14,961 in 2016 – a decrease of 877. The process of make yourself bankrupt changed on 6 April 2016 to an online application rather than a court appearance and it was thought that this would lead to a material increase in the numbers of bankruptcy petitions. In addition, now the cost of the application can be made by instalments.

The number of creditor petition bankruptcies in quarter 4 2016 at 957 is 6.2% higher than the previous quarter but 16.2% lower than the same quarter in 2015. The year on year decrease is likely to be due to the minimum debt a creditor must be owed to make someone bankrupt increasing from £750 to £5,000 from October 2015.

Bev Budsworth, Managing Director of The Debt Advisor Ltd adds, “The demise of many debt management companies has lead to an increase in lead generators targeting customers for IVA’s. IVA’s are a great debt solution tool to deal with serious levels of debt but they do require discipline. If you are thinking about an IVA, make sure you get advice from companies such as The Debt Advisor who are regulated by the FCA to provide debt counselling and debt adjusting”.

December Quarter Corporate Insolvencies

The insolvency number for company insolvencies has increased by around 53.8% in the 4th quarter of 2016 as detailed below.

Type of Procedure 3rd quarter 2016 4th  quarter 2016 Movement
Compulsory Liquidations 632 800 26% ▲
Creditors Voluntary Liquidations “CVL’s” 2,569 4,359 71.2%▲
Administrations 352 327 10% ▼
Company Voluntary Arrangements “CVA’s”  

 

75

 

 

78

14.7%▲
Receiverships 5 0 N/A
Total Numbers 3,633 5,564 53.8%▲

The number of companies going into some form of insolvency has increased by 53.8% on the previous quarter. The increase in the December quarter is due mostly to the voluntary liquidations of 1,796 personal service companies following changes to claimable expenses rules.  The Treasury had previously confirmed they will shift the responsibility and liability from the personal service companies to the agents in the public sector that employ people through these type of companies. This is going to take effect from April 2017.  Specialists in the contracting industry believe this will in due course extend to other organisation outside of the public sector.

The year on year figure of company insolvencies has also seen an increase of 12.6%.

The Debt Advisor Ltd incorporates The Business Debt Advisor (TBDA) which specialises in helping businesses struggling with debt issues. Bev Budsworth adds, “January has seen a marked increase in the number of enquiries from company directors. The reasons appear to be varied but do include loss of turnover caused by customers holding back on orders as a result of the uncertainty caused by Brexit.” Bev adds “Companies need to drive performance on a daily basis and maximise opportunities which arise as others dither.”

If you or your business is struggling with financial difficulties, feel free to give our teams a call.

The Debt Advisor 0800 0851 825
The Business Debt Advisor 0800 7810 990

There a range of solutions depending on whether you are salaried or self employed or you are a director or shareholder of a limited company. If you would like our team to call you, please use our contact form.

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).