The latest figures released by the Insolvency Service for England & Wales highlight a concerning uptick in personal insolvencies, with a 9.9% increase in April 2024 compared to the previous month. This rise brings the total to 9,651 registered cases, reflecting a 4.7% increase from April 2023’s tally of 9,222 cases.

Breakdown of Insolvency Types

The insolvency figures comprise 648 bankruptcies, 3,436 debt relief orders (DROs), and 5,567 individual voluntary arrangements (IVAs). Notably, the number of DROs reached a record high for the month, a spike attributed to the recent elimination of the £90 administrative fee required to obtain a DRO, effective from April 6, 2024. This change has made DROs more accessible, contributing to their significant increase compared to the long-term monthly average.

Bankruptcy filings in April maintained a consistency with the past nine months and showed a slight increase from April 2023. Despite this, the numbers remain about half of those recorded pre-2020, reflecting a long-term decline since their peak in 2009.

IVAs, meanwhile, remained steady, aligning with the numbers observed over the past year. This stability suggests that while some aspects of insolvency are fluctuating, the IVA figures are not currently experiencing the same volatility.

Increase in Breathing Space Registrations

April also saw a notable increase in registrations under the Debt Respite Scheme, commonly referred to as “breathing spaces,” with 7,649 instances recorded—a 16% increase from April 2023. This scheme, which includes Standard and Mental Health breathing spaces, has been a critical component of the support mechanism for those grappling with debt. Since its inception in May 2021, StepChange Debt Charity has registered 62% of all breathing spaces, highlighting the scheme’s importance in providing temporary relief for debtors.

Industry Insights

Tim Cooper, President of R3 and a Partner at Addleshaw Goddard, emphasizes the impact of the removal of the DRO fee as a significant driver behind the rise in personal insolvencies. He notes that while the overall numbers of breathing spaces have slightly decreased from the previous month, they remain higher year-over-year, underscoring the persistent need for debt solutions and advice among UK residents.

Cooper also points to the ongoing cost-of-living crisis as a major factor exacerbating financial difficulties for many. Despite a decrease in inflation, the cost of living continues to climb, forcing more individuals to rely on credit to manage their financial gaps. However, he remarks on a shift in consumer sentiment, observing a growing optimism about personal financial situations over the coming year, despite persistent economic uncertainties and job security concerns.

Looking Ahead

The recent statistics from the Insolvency Service underscore the complex financial landscape many individuals are navigating. As the cost of living remains a significant challenge and the economic outlook continues to evolve, personal insolvencies are likely to remain a critical indicator of the nation’s financial health and the effectiveness of current financial support systems.