In England and Wales the number of people becoming insolvent in Q4 2016 was 22,852, a 4.3% decrease on the previous quarter, but 9.8% higher than the same quarter of 2015.

This was compromised of 3,786 Bankruptcies, 6,243 Debt relief Orders (DROs) and 12,823 IVAs. The increase in 2016s individual insolvencies was mainly due to the increase in IVAs, which increased 23.2% when compared with 2015. Although Q4 saw a decrease in IVAs of 5.1% on Q3, there was a 21.7% rise on the same quarter last year.

DROs were down 3.8% on Q3, and down 4% compared with the same quarter last year. Overall there was an 8.4% increase on 2015 as a whole, with 26,196 DROs in 2016.

Bankruptcies continue to fall with a 2.1% decrease on the previous quarter and a slight rise of 0.1% on the same quarter last year. In total 2016 saw 14,989 bankruptcies, a fall of 5.4% compared with 2015 – a seventh consecutive decrease.

In 2016 one in 506 adults became insolvent.

“It’s too early for increased consumer credit lending to be impacting on the numbers of people seeking insolvency solutions. The rise is down to easier accessibility for all personal insolvency procedures, either because of changes in the way they work or, as in the case of the IVA, because access is available at lower levels of debt and income”.

David Mond – CEO ClearDebt

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In England and Wales the number of people becoming insolvent in Q3 2016 was 24,254, a 6% increase on the previous quarter and 19.3% higher than the same quarter in 2015.

This was comprised of 3,844 Bankruptcies, 6,490 Debt Relief Orders (DROs) and 13,917 IVAs. The increase in individual insolvencies was mainly due to the increase in IVAs, which increased 10.9% when compared with Q2 2016.

DROs decreased by 3.7% when compared with Q2 2016, which is mainly due to the change in eligibility criteria introduced in October 2015.

Bankruptcy orders were 7% higher than in Q2 2016 yet still 1.5% lower than in the same period in 2015. Debtor applications for bankruptcy increased by 12% with a fall of 3.7% in creditor petitions for bankruptcy. This is likely a result of the change in process introduced in April this year.

A staggering figure emerges where in the 12 months ending Q3 2016 1 in 515 adults became insolvent. This equates to 0.19% of the adult population and is the second consecutive increase in the insolvency rate.

Companies entering insolvency has seen a 2.2% increase in Q3 2016 compared to Q2 2016. It is estimated the liquidation rate in the last 12 months ending September 2016 was 0.41%, the lowest level since comparable records began in the last quarter of 1984.

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This was driven by a 3.4 per cent increase in debt relief orders (DROs), which was caused by a change in eligibility criteria. Of the 6,722 DROs in Q1 2016, about a quarter involved qualifying debts greater than the previous threshold of £15,000.

Previously, only people with debts below £15,000 could apply for a DRO, but in October last year the limit was increased to £20,000, enabling more people to use DROs as an alternative to going bankrupt.

Sarah Albon, chief executive of the Insolvency Service, said: "Personal insolvencies are lower than a year ago. The change to eligibility criteria for debt relief orders, introduced in October, has enabled more people to get the solution that is right for them."

This change seems to have had a positive effect though, as the number of individual voluntary arrangements (IVAs) and bankruptcies decreased by 1.2 per cent and 0.7 per cent respectively.

This illustrates the success of the change in eligibility criteria for individuals; however, it's a different picture for companies.

The total number of insolvencies increased for the first time since Q1 2014, which was down to a large rise in the number of compulsory liquidations.

The figures show that construction remains the sector with most insolvencies, although the numbers are decreasing more quickly than the total.

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In the third quarter of 2015 there were 19,683 individual insolvencies, 2.8 per cent higher than in the second quarter of 2015. This was however a decrease of 18.5 per cent compared to the third quarter of 2014. 

This growth of insolvencies was driven by a rise in individual voluntary arrangements (IVAs). The 10,197 IVA's in the third quarter of 2015 was a 9.3 per cent increase compared to the second quarter of 2015. Again though, this is a decrease from the third quarter of 2014, of 17.9 per cent.

Even though these figures have seen an increase, the rate of insolvency across England and Wales has still dropped. In the 12 months ending in September 2015, one in 550 adults (0.18 per cent of the adult population) became insolvent. This was the lowest rate since the 12 months ending in December 2005.

In contrast to insolvency figures, the number of bankruptcies was at the lowest level in 25 years. There were a total of 3,857 bankruptcy orders in the third quarter of 2015, which was 3.3 per cent lower than the second quarter. Furthermore, this was a decrease of 21.4 per cent from the third quarter in 2014. The number of bankruptcy orders has been on a decreasing trend since 2009. However, the introduction of debt relief orders (DROs) in 2009 is likely to have affected the number of bankruptcies.

DROs have also seen a decrease since their introduction, with 3.5 per cent less in the third quarter of 2015 than in the second. The drop from the same period in 2014 stands at 17.3 per cent.

Companies have seen improvements this quarter, with continuous decreases in insolvencies, compulsory liquidations, creditors' voluntary liquidations and administrations and company voluntary arrangements (CVAs). The estimated liquidation rate in the 12 months ending in September 2015 was 0.46 per cent of active companies, the lowest level since comparable records began in the last quarter of 1984.

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Vice-president of R3 Giles Frampton was speaking after the latest figures from the Insolvency Service showed that 101,049 individuals were bankrupt across England and Wales in 2013, which is down 7.9 per cent on 2012's figure. 

However, he is worried that many people will have "done their best" to avoid insolvency in the run-up to Christmas and this is going to see them struggle in January and February. 

"It will be interesting to see how these figures change in the first quarter of 2014," Mr Frampton stated. 

Consumers traditionally overspend over the festive period and unless they have a solid plan in place for dealing with this situation, they can find themselves with a debt hangover.

He noted there have now been at least 100,000 new cases of personal insolvency a year since 2006. Indeed, Mr Frampton believes levels are still "astronomically high compared to recent decades". 

While the statistics make it clear that plenty of people still require debt help to get by, there are signs the UK as a whole is becoming more responsible with their finances as they try to avoid going into the red. 

Individual voluntary arrangements (IVAs) remain the most popular debt relief method though, as 12,333 were taken out in the fourth quarter of 2013, which accounts for nearly 50 per cent of all insolvencies. 

Mr Frampton believes the increasing use of IVAs is "symptomatic of people struggling with the rising cost of living", as the use of this debt management measure is usually associated with a "slow build-up of debt".

There has also been a rise in the number of self-employed individuals seeking bankruptcies, with this sector accounting for 24.4 per cent in the third quarter of 2013. 

By James Francis

The post Personal insolvency could be “tip of the iceberg” appeared first on Latest UK Debt News & Personal Finance | ClearDebt Newsdesk.

Research by Prudential highlights the scale of the problem facing many individuals who are looking to give up work this year, as the average amount of money they owe is £31,200. However, this represents a significant decrease on the figure of £38,200 from 12 months ago.

Tackling debt

However, it does show that progress is being made when it comes to tackling debt issues. For example, the typical amount owed by men has dropped from £45,300 to £33,800 in the past 12 months. This suggests people are increasingly recognising the need to take control of their financial situation.

Of those questioned as part of the Class of 2013 study, 56 per cent with debt owe money on their credit cards and 43 per cent have yet to clear their mortgages. Some 21 per cent have outstanding bank loans and 19 per cent are still using an overdraft, which highlights how unsecured borrowing is still being relied upon.

Making progress

Vince Smith-Hughes, Prudential's retirement income expert, said: "The fall in average debt owed by this year's retirees is a welcome sign that people are paying off some of the money they owe before they stop working.

"Debt does not have to be a major issue for people in retirement as long as they have sufficient income and realistic and manageable repayment programmes in place. But when people's finances are still under pressure … it's important to ensure debt repayments do not eat into retirement incomes too much."

He added it is best if people pay off debt while they are still working, as this gives them a guaranteed revenue stream.

Geographical differences

Wales (26 per cent) was found to be the location with the highest proportion of those retiring with debts outstanding. This was followed by the West Midlands (22 per cent) and the south-west (21 per cent), while individuals in the Yorkshire and Humber were found to be in the best position (13 per cent).

These regional differences could point to the fact that consumers in certain areas are not taking the issue of debt management as seriously as others.

Seeking debt help

Moving forward, people should look to proactively clear their debt. One option worth considering is an individual voluntary arrangement (IVA), as it offers individuals the opportunity to reduce their monthly repayments.

Interest charges are typically frozen for the duration of the IVA – which will usually last for five years – while the amount of debt people are unable to repay within the IVA is written off at the end of it and it will stop unwanted contact from creditors.

The measure allows anyone to avoid bankruptcy, but it is still a serious undertaking. The decision to enter into the legally binding agreement is not one that should be taken lightly, but it does protect a family's home from being sold against their wishes.

By Amy White

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Figures from the National Debtline show that the organisation has dealt with 158,293 calls for help with credit card debts in the past ten Januarys. Over the past decade, a pattern has developed whereby a lull in the number of people seeking advice in December is followed by a sharp rise in the following month.

This January is expected to return similar results, as a large proportion of people in the UK are thought to have used credit cards to fund their Christmas purchases.

Joanna Elson, chief executive of the Money Advice Trust – which runs National Debtline – said: "December can be a tough month on household finances and lots of people use credit cards to manage the upturn in spending. This can be a sensible way to manage financial peaks and troughs, but can be dangerous if you don't have surplus money left over in the other months to pay off debts accrued over the festive period."

As a result of this, Ms Elson said it is a good idea for people to spread the cost of Christmas across the year. She advises people to divide the total by 12 and try to put that amount away every month, as this means they will be in a much healthier position when the next festive period comes around.

People who are struggling with debts – whether from Christmas or just accrued over the course of the year – should seek advice on how they can take back control of their finances. Provided they owe at least £10,000, an individual voluntary agreement (IVA) could be the perfect option.

The serious financial undertaking typically lasts for five years and individuals are allowed to write-off all the debt they are unable to repay within the IVA after this time period. It also reduces monthly repayments to a more manageable sum and stops unwanted contact from creditors.

By Joe White

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This is according to the latest Credit Action report released today (January 11th), which shows the state of consumer finances. Average household debt – including mortgages – was found to be £53,867 and £165 million was paid out on personal debt during the course of the month.

With 1,607 people made redundant every day between August and October, plenty of individuals in the country will find their budgets are stretched.

The study also found that a property is being repossessed every 16 minutes and four seconds, while someone is being declared insolvent or bankrupt every four minutes and 42 seconds.

Consumers struggling to make ends meet might be better off seeking out a debt solution. An Individual Voluntary Arrangement (IVA) is a legally-binding agreement between a person and their creditors and it consolidates debts into one monthly payment.

Among the benefits associated with an IVA are that it freezes interest and charges on all unsecured debts, writes-off any debt people are unable to repay within the IVA and stops them from having to file for bankruptcy.

However, adults in the UK should think long and hard before signing up for an IVA, as it is a serious financial undertaking and typically lasts for five years.

Citizens Advice Bureaux in England and Wales dealt with more than 8,000 new debt problems during the 12 months to September 2012 and this highlights how people are at least recognising that they need to take action.

John Miles, Gocompare.com's business development director, recently stated that 2013 promises to be a struggle financially for a lot of consumers.

"Without doubt, 2013 will be a tough year for many people as austerity measures continue to bite. Providers constantly review their pricing, so even if you think you're getting a good deal on your financial products at the moment, it is worth shopping around on a regular basis."

By Amy White

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