BANKRUPT by 35
Insolvencies are on the rise - and the increase is being driven by young people
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and more young adults are becoming insolvent as they struggle to pay their debts, official figures have revealed. The latest statistics from the Insolvency Service show that 116,407 people across England and Wales became insolvent in 2018, meaning they were unable to pay money they owed on time.
That’s up from 99,157 cases in 2017, and the highest number recorded since the start of the decade.
The number of insolvencies has been rising year on year since 2015, and that rise has been driven by problem debt among young people in particular.
The number of 18-24 year olds who have become insolvent has more than doubled from 3,318 in 2015 to 6,773 in 2018.
However, 18-24 year olds remain a relatively small proportion of total insolvencies.
The increase seen among 25-34 year olds - while not quite as rapid - has been more significant.
Some 34,591 people aged 25-34 became insolvent in 2018 - up by 88% compared to 18,426 in 2015.
That’s the highest number recorded since at least 2006, when the figures began - and even higher than during the banking crash of 2007.
The figures show that the older you are, the less likely you are to have been affected by the rise in people going bust. The number of insolvencies has increased by 54% for 35-44 year olds, 22% for 45-54 year olds, 11% for 55-64 year olds, and has actually decreased by 10% for those aged 65 and over. Debby Mulling, head of engagement at national charity Turn2us, said: “It is concerning but unfortunately not surprising that insolvencies are on the rise.
“With wages continuing to stagnate while housing costs and other bills constantly rising, we are sleepwalking into another debt crisis.
“These findings are especially worrying as it shows the increased strain put on younger people, who may have the burden of insolvency hang over their heads for decades to come.”
The majority of people who became insolvent in 2018 did so through individual voluntary arrangements (IVAs).
This is a way of repaying creditors some or all of what they are owed, and only needs the approval of 75% of creditors to become a binding arrangement.
Some 71,035 people across England and Wales went into an IVA last year - 61% of the total number of insolvencies.
Meanwhile, 27,915 people agreed to a debt relief order (DRO), or 24% of the total. These are a form of debt relief that is available to those who have a low income, low assets and qualifying debts up to £20,000. There is no distribution of the person’s assets to creditors, and discharge from debts takes place 12 months after the DRO is granted.
Just 15% of insolvencies were bankruptcies, or 17,460 in total. Bankruptcies are available for anyone who is unable to pay their debts.
In these cases, the debtor’s assets will be transferred to a trustee, who will then distribute the proceeds to the creditors. Discharge from debts again usually takes 12 months.