Personal insolvencies rising in England and Wales

On 9 October 2016, the UK government revealed it will establish a combined body to advise the public on money, debt and pensions. At this stage, the proposed body is still being designed, with no time frame given for its implementation.

The government’s announcement is timely, given how personal insolvencies rose by 19.3% in England and Wales during Q3 2016, compared to Q3 2015. While indebted consumers wait for the new financial advice service to launch, what insolvency options are some turning to?

Insolvency options

The Insolvency Service revealed that the number of new individual voluntary arrangements (IVAs) rose to 13,917 in Q3 2016. This marked a 10.9% rise from Q2 2016, and a 28.8% increase from Q3 2015.

With IVAs, consumers and creditors can agree a repayment deal under the guidance of an insolvency practitioner. Consumers must pay a portion of their debts in one go, but are at less risk of losing their homes. Whereas bankruptcy often entails the complete loss of assets.

Since April 2009, consumers have been able to use debt relief orders (DROs) if their burden is less than £15,000, which increased to £20,000 in October 2015. This method can be used to avoid declaring bankruptcy and still write off debts. 

Consumer concerns

Although bankruptcy declarations grew 7% year-on-year in Q3 2016, the rate of growth was slower than for certain alternatives, like IVAs. Nevertheless, insolvency on the whole is becoming more common and the Money Advice Trust’s Director of External Affairs, Jane Tully, is urging those with high debt to take advantage of free advice in their financial planning.

However, Tully’s words come at a time when the Money Advice Service (MAS) is being guided towards closure, leaving the public without a long-term financial advice service from the government. Parliamentary Under Secretary of State for Pensions Richard Harrington said the new service “will help consumers make the right financial decisions”, but for now they need other options.

In the meantime, Dukes Bailiffs can provide informative consumer debt advice while the government develops its new financial advice service – you can contact the team today with any questions.