Individual insolvencies in England and Wales have increased drastically since January 2023, data reveals.  

Thousands of people across the country are seeking help from debt advice organisations in a bid to manage high interest rates and unaffordable repayments.  

January’s figures from the Insolvency Service monthly report show a 60% rise in Debt Relief Orders (DRO). 

DROs more than doubled in January as 2,793 applications were submitted compared to 1741 applications last January.  

Despite a 16% drop in Individual Voluntary Arrangements (IVA) they remain significantly higher than DRO and bankruptcy applications.

Bankruptcy applications saw a 20% increase this January.

 

 

Individual voluntary arrangements remain the highest form of insolvency over the last 5 years. Source: Insolvency Service 

Pay Plan, a Grantham based debt advice organisation backs the recent figures as they manage an influx of people eligible for DROs. 

Team manager, Lucy Crossley, 37, said: “The need for debt advice seems to increase year after year. 

 “With the current climate, people are desperately looking for way to repay their debts in an affordable but manageable way, but as it stands, many can’t afford to do that.”

Debt advisors are anticipating a greater rise in DROs following changes in the 2024 Spring budget.  

Chancellor, Jeremy Hunt announced the removal of the £90 administration fee.   

Previously applicants required a debt level below £30,000 alongside an asset value below £2,000 to be eligible.  

From June, applicants will require a maximum debt level of £50,000 with an asset value allowance of £4,000.  

“In many cases, people are seeing their debt level reduce but at the same time the disposable income used to pay them off is reducing also,” Lucy adds.  

She manages a team of trained agents who assess hundreds of clients a day whilst providing tailored financial advice.  

The process involves an in-depth assessment of a client’s circumstances, assets and expenditure followed by explanation of eligible debt solutions.  

PayPlan’s Partnership team work alongside creditors to offer best solutions to their clients

Pay Plan’s Special Advice Team work with creditors on the behalf of vulnerable clients like the elderly and terminally ill to apply for debt write off. 

“We see that many of our clients are still dealing with the fall out of the COVID 19 pandemic and the recent cost of living crisis, which is leaving many households in a deficit each month.” 

“Many households have more going out than they have coming in and that’s before they consider their contractual monthly payments for their outstanding debt.” 

The 2023 Debt Need Survey by the Money and Pensions service found that 15% of the UK adult population (8.1 million) needed debt advice.  

The Money and Pensions Service found that under 35s are in most need of debt advice.
Photocredit: Unsplash

“Mortgages are increasing, along with utility bills, groceries aren’t lasting meaning that people are having to fork out more money just to live comfortably.  

“A lot of people aren’t even living comfortably due to the fear of not being able to pay back what they owe and the legal impact that it could have on them.” 

Pay Plan are the UK’s largest provider of free debt advice and solutions, helping over one million people for over 30 years.  

They provide support to thousands of individuals with their finances each year.  

Other solutions managed by Pay Plan include debt management plans (DMP) and individual voluntary arrangements (IVA).  

Trust Deeds and Debt Arrangement Schemes (DAS) are available to clients living in Scotland.  

Most solutions involve creditors agreeing to receive a reduced monthly payment for an agreed term, typically with a freeze on interest and charges.  

Despite the increase in DROs, the Insolvency Service recorded a 16% drop in IVAs compared to last January but an increase in recent months.  

In January 2023, 5373 people entered an IVA, a legally binding agreement to pay all or a percentage of your debt.   

However, January’s IVA figures follow a gradual decline in requests between last October and December.   

“It’s better to prevent than to react.”

Laura Howard, Debt Advisor 

Debt Advisor, Laura Howard, 40, said: “A drop in IVAs but an increase in DROs means that more people have little to no disposable income to pay back their debts.  

“We want to help people live a better life. 

“Using credit to pay for your groceries or utility bills or having less disposable income in the bank before payday are just some of the early warning signs.  

“Our advice to everyone is to create a budget, control what you have going in and out.  

 “It’s better to prevent that to react.” 

Pay Plan’s partnership development team are working alongside creditors, major banks and charities to create awareness on the increasing need for debt advice.  

They aim to find more effective ways to help all who are struggling financially.