By Lauren Howells

Personal insolvencies have risen for the second year running, returning to the levels last seen in 2013 and 2014, according to new statistics released by The Insolvency Service.

99,196 people became insolvent in England and Wales in 2017

The figures revealed that 99,196 people became insolvent in England and Wales in 2017, a 9.4% rise on 2016. 

Driven by an increase in individual voluntary arrangements 

According to the report, the rise was driven by an increase in individual voluntary arrangements (IVAs), which “reached the highest recorded annual total”, with 59,220 IVAs in 2017. This is an increase of almost 20% on 2016.

An IVA is a type of ‘debt deal’, where an agreement is made by the debtor to pay off all or part of their debts through regular payments to an insolvency practitioner. These payments are then divided among the creditors. IVAs prevent creditors from taking action against the debtor for their debts. 

Bankruptcies remained stable 

The statistics showed that while bankruptcies remained stable with 15,082 bankruptcy orders in 2017, a 0.3% increase on 2016, this varied by the type of application. Orders on the application or petition of the debtor, for example, increased by 5.9%.

1 in 467 adults became insolvent in 2017

The Insolvency Service statistics also revealed that 1 in 467 adults (0.21% of the adult population) became insolvent in 2017, up from 507 in 2016.

The Insolvency Service report said:

“The individual insolvency rate is related to levels of household debt, and economic growth. The current individual insolvency rate remains elevated compared with rates of less than 0.1% before 2004. In the early- to mid-2000s, there was a large expansion of credit which coincided with a large increase in the individual insolvency rate”. 

No official statistics for more informal debt plans

A spokesperson for the Association of Business Recovery Professionals: R3, Duncan Swift, told the Guardian that the official statistics on personal insolvencies didn’t tell the full story. He said that there was a lot of “hidden insolvency out there”. 

There are no official statistics collected regarding the number of individuals who are undertaking a more informal means to deal with debts, such as debt management plans. Swift added that this made it “ impossible to grasp the full scale of serious indebtedness”.

“…this trend is, of course, a cause for concern”

Jane Tully, director of external affairs at Money Advice Trust, the charity that runs National Debtline, said:

“We have now had two consecutive years of significant growth in insolvencies, and this trend is, of course, a cause for concern.  Today’s figures reflect the challenging times many households across the country are facing. 

“At the same time, the fact that this rise is being driven solely by an increase in individual voluntary arrangements (IVAs) is inescapable. 

“We remain concerned that IVA products are being sold that are unsuitable for people’s circumstances – and believe that the lead generation companies that are a big part of this problem should be brought under the Financial Conduct Authority’s regulatory regime and robust practices put in place to ensure people are provided correct information.”

Tully added that anyone who was concerned about their debt should seek free debt advice as soon as possible, by contacting a charity such as National Debtline.

Last week, the Guardian reported on a study which found at least 70% of the UK’s working population to be “chronically broke”.