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New Figures Show the Leading Causes of Insolvency in 2015

Authored by Phil Meekin

Phil Meekin

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Approximate read time: 3 minutes

At the end of 2016, insolvency trade body R3 released findings into the leading causes of insolvency in 2015. The figures showed that individuals living beyond their means, reduced income levels and breakdowns in a relationship were among the top causes.

These figures show not only the reasons why people enter insolvency but also the clear differences between why men and women go bankrupt. However, these figures only deal with personal bankruptcies and don’t consider other individual insolvency procedures. Including those figures may indicate a slightly different trend than what is detailed below.

Trading problems

In 2015, 26% of bankruptcies related to trading problems. So sole trader businesses running into financial trouble, this was a 1% increase on 2014. Out of the total number of bankruptcies for 2015, trading problems accounted for 3,005 bankruptcies for men (34%), and 795 bankruptcies for women (13%).

These figures demonstrate that men’s finances are affected significantly more by the business they own or work for than the finances of their female counterparts. However, this does not consider or showcase men and women who are self-employed.

Living beyond their means

General living issues had a significant impact on the finances of those who went bankrupt, accounting for 5,915 bankruptcies for men and 5,180 bankruptcies for women. For both, the most common cause of bankruptcy was living beyond their means with 995 bankruptcies for men and 1,110 for women.

That is where the similarities end; however, as the second and third most common causes of non-trading bankruptcy for men are work-related.

990 of which due to management failure and the loss of a job caused 920. For women, they are more personal, or household related; 1,075 of which were caused by a relationship breakdown, and a significant reduction in household income caused 750.

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These findings again point to the importance of employment on the finances of men. By contrast, for women, their financial security comes from maintaining steady finances in their household.

R3 spokesperson Cathy Williams agrees in her comments on the findings;

“The notable thing about the statistics is the different financial situations men and women face. For men, it’s often the failure of their business or loss of their job that leads to this situation.

“On the other hand, women’s bankruptcies are disproportionately linked to relationship breakdown or a fall in household income…. Careful budgeting and seeking early professional advice – rather than getting deeper into debt – can help.”

Despite these figures, the number of bankruptcies has fallen in recent years, as has the number of insolvencies in general. This fall has been put down to changes in the economy and the increased uptake in other personal insolvency procedures such as Individual Voluntary Arrangements (IVA) and Debt Relief Orders (DRO).

In summary

In 2015, 26% of bankruptcies related to trading problems; 34% of all bankruptcies for men, and 13% of women. While this would suggest men’s finances are more affected by business-related problems, non-trading issues also accounted for a substantial number of bankruptcies for both. From there, work-related problems, such as an issue with management or sudden unemployment, had more of an effect on men. Women meanwhile, suffered more from personal or household related issues, such as a reduction in income or the ending of a relationship.

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