Financial Struggles Continue: Breathing Space Registrations Soar by 26% in England and Wales

Financial Struggles Continue: Breathing Space Registrations Soar by 26% in England and Wales

The number of people seeking “breathing space” from their debts in England and Wales has seen a significant increase of 26% in the second quarter of 2023 compared to the same period in 2022, according to data from the Insolvency Service.

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The total number of breathing space registrations during this period was 21,232, with 20,919 standard registrations and 313 mental health breathing space registrations.

A breathing space provides legal protections from creditor action for individuals facing problem debt for up to 60 days.

In cases of mental health crises, individuals receiving mental health crisis treatment can access a breathing space that lasts for the duration of their treatment, plus an additional 30 days.

Decline in Personal Insolvencies:

The figures from the Insolvency Service also reveal a notable 11% decrease in the number of people entering personal insolvency in the second quarter of 2023 compared to the same period in 2022.

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A total of 26,390 personal insolvencies were recorded during this period, which was also 8% lower than in the first quarter of the year.

Within personal insolvencies, individual voluntary arrangements (IVAs) constituted two-thirds (66%), while debt relief orders (DROs) made up 27%, and bankruptcies accounted for the remaining 7%.

The number of bankruptcies registered in the second quarter of 2023 increased by 4% from the previous quarter and by 11% from the second quarter of the previous year.

These numbers marked an increase from the 40-year low in bankruptcies observed in 2022, as stated by the Insolvency Service.

Surge in Company Insolvencies:

Company insolvencies reached their highest quarterly level since 2009, according to the Insolvency Service’s data.

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Between April 1 and June 30, 2023, a total of 6,342 company insolvencies were registered across England and Wales.

This figure represented a 9% increase from the first quarter of 2023 and a 13% increase from the second quarter of 2022.

Notably, creditors’ voluntary liquidations (CVLs) reached a record high of 5,240, the highest level since records began in 1960.

Explanations and Analysis:

The surge in breathing space registrations can be attributed to an increasing number of individuals seeking protection from creditor actions while dealing with their problem debts.

This indicates the ongoing financial challenges faced by many people in the region.

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The decline in personal insolvencies, particularly in the number of IVAs, suggests that the trend of higher-than-normal IVA registrations during the pandemic may be slowing down.

Rising interest rates may have impacted individuals’ confidence in their ability to service financial commitments associated with IVAs, leading to a 22% drop compared to the same quarter in the previous year.

The increase in company insolvencies, including bankruptcies and debt relief orders, indicates that many businesses and individuals are facing severe financial difficulties.

The pandemic’s lingering economic impacts, coupled with rising inflation and energy prices, have put a strain on finances, making it challenging for individuals to meet their financial obligations.

Conclusion:

The data from the Insolvency Service paints a picture of the financial struggles faced by individuals and businesses in England and Wales.

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The rising number of breathing space registrations and company insolvencies highlights the need for financial support and advice for those facing economic hardships.

As the economic landscape continues to evolve, seeking timely advice for both personal and business finances becomes increasingly crucial for navigating these challenging times.

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