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Individual insolvencies increase as UK workers feel the squeeze

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The total number of individuals being formally declared as insolvent has reached its highest level for the past six years, based on data from March to May 2018. There are now a record number of UK citizens proceeding with Individual Voluntary Agreements (IVA’s), an arrangement whereby individual debtors agree to repay their creditors some or all of what they owe.

In the 3 month period to June 2018, individual insolvencies reached 28,951, an increase of over 4% on the previous quarter and a significant 27% increase compared to the same period in the previous year. According to The Insolvency Service, the recent increases are in line with an upward trend of personal insolvencies since 2015. On a regional basis, in 2017 the top four areas for IVA’s are Stoke-on-Trent, Plymouth, Hull and Scarborough.

Personal insolvencies fall into three categories – bankruptcies, IVAs and debt relief orders (DROs) – but figures do not take into account the multitude of debt management plans people agree with their banks. The Insolvency Service said nearly two-thirds of personal insolvencies in the second quarter of 2018 were IVAs, around a quarter were DROs and around 1 in ten were bankruptcies.
President of the insolvency organisation R3, Stuart Frith, commented:

There are plenty of reasons why people might be feeling the pinch. Wage growth is barely higher than inflation after a long period of real wage falls…although unemployment is low, there are more people earning variable amounts in the gig economy, which can make budgeting difficult…meanwhile, outstanding consumer credit volumes have been growing, as has the average amount of debt per head.”

The IVA data comes soon after recent statistics from the Office for National Statistics showing that in 2017, UK citizens were overall spending more than they earned for the first time since 1988, with the average overspend at £900 per household. The ONS figures also indicated that those on low incomes were also far more likely to borrow extra money to supplement their day to day spending and budget.

David Birne of chartered accountants HW Fisher said that should interest rates start to increase, people struggling to pay bills now will find that their situation will be far worse in future:

Those who’ve been relying on credit to fund a more comfortable lifestyle – who are often the poorest and most vulnerable – are sitting ducks to interest rate rises.”

If you are thinking about taking insolvency legal action against another individual or company but are worried about the costs involved, Advantage Litigation Services have the skills and expertise to help you find a way of funding commercial litigation without risking your personal finances or those of your business. Click here to contact us today or call 0800 160 1298 to see how we can help.

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