A total of 90,000 people became insolvent during the full year of 2016, in the first annual increase since 2010.
Official statistics released today (January 27) by The Insolvency Service, which administers the insolvency regime in England and Wales, show that total personal insolvencies reached a total of 90,930 last year. This was a 13 percent rise on 2015.
This total comprised 49,745 IVAs, which were up 23 percent year-on-year and returned to the levels generally seen from 2009 to 2014.
IVAs were the main driver of the annual rise though an overall bounce in IVA levels since a low point in the middle of 2015, now appears to have slowed down.
There were also 26,196 debt relief orders (DROs) during 2016, which reflected an eight percent annual increase. Generally, the numbers of DROs have flattened out, after a small rise when the barriers to entry were relaxed.
As many in the insolvency profession would have expected, bankruptcy levels showed a drop off in annual figures.
There were 14,989 bankruptcy orders in 2016 – a fall of five percent – which could be partly explained by the threshold change.
Over a much longer period, the drop in bankruptcies is slightly more dramatic.
During the last three months of 2016, they reached 3,786, but this compares to 15,000 for the same period in 2007 and nearly 20,000 (per quarter) at their peak in 2009.
However, the true extent of personal insolvency remains masked by the lack of reliable statistics on informal debt arrangements.
Coupled with growing household debt levels, the two factors leave an information gap on how many individuals might be teetering on the edge of financial distress.
Paul Rouse, partner and head of national creditor services at accountancy firm Mazars, said: “The events of 2016 have to eventually influence the personal finances of significant numbers of people.
“There remain record levels of household debt, but stagnant interest rates, with steady wage growth and employment provide the perfect environment for these problems to incubate out of sight.
“It will only require a trigger event, such as a rise in interest rates, or rising costs of living, for many people to topple into serious debt problems.”
Rouse added: “Many people still rely on credit facilities for everyday living costs and the most vulnerable may not be able to cope for much longer.
“Insolvency figures amongst individuals would then undoubtedly rise, possibly after a short period of indecision by many as to which route to debt forgiveness they should take.
“What is important is that there are now many formal and informal options available to those people.”