Record numbers of personal insolvencies recorded in 2018

Figures released by the Insolvency Service have indicated that personal insolvency figures have risen for the third consecutive year, largely due to an increase in IVA appointments.

A record number of 22,717 IVAs took place in 2018; a 60.5% increase from Q3 2018.

Total individual insolvencies were at the highest level since Q4 2010 which included several high-profile names seeking advice and declaring themselves insolvent.

The total number of individual insolvenciesrose to almost 35% in Q4 2018 compared to both Q3 2018 (34.8%) and Q4 2017 (34.7%). Commercial pressures around this period include the recent US imported trend of “Black Friday” with some individuals increasing their spend and overall debt levels in the process.

It has been well documented that the retail sector has taken massive financial hits of late including throughout much of 2018. Retailers have responded via various restructuring plans which are often aimed at targeting higher volumes of consumerism resulting in an increase in individual spending.  

IVAs were originally introduced to provide an alternative option to Bankruptcies. IVAs are particularly popular for those wishing to protect their high-equity assets (often properties and expensive cars etc.) without having the need to make any forced sales, whereas a Bankruptcy procedure may require this.

An example case is the former Glamour Model, Katie Price, who avoided Bankruptcy in December due to an alleged loan from a friend to cover her £22,000 tax bill as well as an agreement via a specialist Insolvency court to pay back what she owed to creditors over an arranged period. Thus, resulting in her being able to keep her West Sussex mansion and other notable assets.

Personally, we all have a responsibility to act appropriately to avoid insolvency procedures such as IVAs and bankruptcy. Borrowing has been very accessible and affordable in recent years and we are now seeing many financially unstable households now starting to struggle following years of mounting debt.

The squeeze will only get tighter if spending habits don’t change and the role of the Insolvency Practitioner has never been more important as we navigate 2019.