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Personal Insolvencies reach three year high

However, bankruptcy numbers continue to decline with a decrease in numbers for the fifth successive quarter and the lowest quarterly total in 35 years.

The first quarter of 2022 (Q1) saw the number of individuals entering a personal insolvency procedure reach their highest total number in over three years, since Q4 2018.

RSM said Q1 2022 marked the eighth quarter to be affected by the pandemic and associated national measures.

The figures, released by the Insolvency Service, reveal that there were 32,305 individuals entering either bankruptcy (1,679), a debt relief order or DRO (6,629) or an individual voluntary arrangement or IVA (23,997) in Q1 2022.

The number of individual insolvencies registered in Q1 2022 is 17% higher compared to the previous quarter and 14% higher than during the same quarter in the previous year.

IVA numbers continue to exceed the immediate pre-pandemic quarterly average and rose a further 20% when compared to the previous quarter, whilst DROs continued their recent trajectory, increasing for a fifth successive quarter and 13% on the previous quarter.

However, bankruptcy numbers reportedly continue to decline with a decrease in numbers for the fifth successive quarter and the lowest quarterly total in 35 years.

Andy Nalliah, personal insolvency partner at RSM UK, said: “IVA registrations for the quarter were recorded at the seasonally adjusted figure of 23,997; the second highest on record and behind only Q2 2020. This would suggest that the first full quarter of lockdown, where many people faced financial uncertainty, the current cost-of-living crisis fuelled by UK inflation.

“Of the 1,679 bankruptcies in the quarter, the Insolvency Service reports that only 16% have arisen because of creditor petitions. This low percentage follows the post-pandemic trend and could well be because debtors are managing to agree terms with creditors and enter an IVA.”

He added: “As interest rates and consumer prices rise, I would expect to see pressure on debtors increase and the number of bankruptcies, and specifically the percentage of those arising from creditor petitions, begin to climb as creditors re-evaluate their approach to both issuing credit and debt recovery.”

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