According to the latest Insolvency Statistics the number of bankruptcies is down 31% from a year ago. In the last quarter, personal insolvencies dropped by 1%, while company insolvencies rose by 2%. However the number of corporate entities entering an insolvency procedure is now 10% up on a year ago, with personal insolvencies down 11%.

The decrease in personal insolvency can be explained by 2 separate factors.

Firstly, the main voting group in consumer credit IVAs are the high street banks and credit card companies. Over the course of the last year they have collectively adopted a more flexible approach upon their receipt of IVA proposals, to the extent that they are now prepared to accept a lesser return than previously had been the case. The increased use of protocol compliant IVAs has no doubt facilitated this process, whereby the institutions are able to handle numerous similarly drafted IVAs rather than a disparate group of IVAs without any apparent similarity. IVA approvals have increased quarter on quarter this calendar year.

Secondly, it is argued that the main generators of creditors petitions (banks and HM Revenue & Customs) are adopting a slower approach to the issuance of bankruptcy petitions which has led to a decrease in the number of bankruptcies. In any event some c85% of bankruptcy petitions are debtors own rather than creditors and we have seen an increase in the number of Debt Relief Orders (“DRO”) quarter on quarter this year as the government has removed pension funds from the maximum allowable asset level of £300 in a DRO. Prior to this many debtors were prohibited from entering the DRO process if they had contributed to a personal pension scheme.

 With reference to corporate insolvency in the run up to Christmas we shall most likely see an decrease in corporate insolvency with the banks unwilling to “pull the plug” prior to the Christmas spending period and January sales. However the banks will no doubt consider the Christmas sales figures when deciding whether to continue to support the high street. The next rent quarter day falls during the Christmas period and with the decision in Re: Goldacre it is highly likely that directors and Insolvency Practitioners alike will hold off commencing insolvency procedures until we are into the new quarter cycle so as to make the next quarter’s rent an unsecured claim rather than an expense of the insolvency procedure.

Whether or not the Bank of England alters rates in the new year will clearly impact markedly on the rate of corporate insolvencies with many borrowers at present merely discharging interest payments rather than chipping away at the capital element of their borrowings. Whether all borrowers could sustain even a negligible rise in rates is questionable.