According to official figures, the number of people becoming financially insolvent in England and Wales in 2022 will reach a three-year high.
In addition, the number of corporate insolvencies rose to the highest level since 2009 last year, again pointing to the impact of tough economic conditions on people and businesses.
Some 118,850 people went financially insolvent last year – an 8% increase from 2021.
The Insolvency Service, which released the figures, said the annual total was slightly down from 122,150 registered personal insolvencies in 2019.
The number of personal bankruptcies in the last three months of 2022 was 6% higher than in the third quarter of the year and 7% higher than in the fourth quarter of 2021.
The figures are made up of bankruptcies, debt counseling (DROs) and individual voluntary schemes (IVAs).
IVAs accounted for nearly three-quarters (74%) of all personal insolvencies in 2022, while bankruptcies were the lowest since 1982.
The number of DROs was higher than in 2021, but remained below pre-pandemic levels, the Insolvency Service said.
DROs are available to those with debts of up to £30,000 and IVAs are agreements where payments are split between creditors.
It also provided figures on the number of people using a breathing space arrangement to provide legal protection for people with problematic debts.
The scheme protects people from their creditors for 60 days, freezing most interest and penalties and halting enforcement actions.
Because problem debt can be linked to mental health problems, these protections are also available to people in psychiatric crisis treatment for the full duration of their treatment plus an additional 30 days.
The agency said there were 70,546 registered breathing spaces in 2022 – 69,334 standard and 1,212 mental health breathing space registrations.
Average quarterly breathing space numbers were 14% higher than in 2021.
Since the start of the scheme in May 2021, more than 110,000 breathing breaks have been registered.
The number of personal insolvencies peaked in 2009 and 2010 before declining over the next five years, the agency said.
An increase in the number of IVAs between 2015 and 2019 subsequently increased the total number of insolvencies.
During the coronavirus pandemic, foreclosures and DROs fell and the increase in IVAs slowed, the service added.
The service also said there were 22,109 business insolvencies recorded in England and Wales last year, the highest number since 2009 and 57% more than in 2021.
The increase from 2021 was due to the highest annual number of voluntary creditor liquidations since comparable records began in 1960.
The relentless demands of the cost of living crisis on people’s finances are clearly forcing more and more people into trouble
From the start of the pandemic to mid-2021, the number of corporate insolvencies was relatively low, likely driven in part by support measures in place at the time, the agency said.
The figures were released as the charity StepChange said it saw more new customers struggling with gas bills, overdue mortgages, rent and council tax in December 2022 compared to the previous month.
The share of clients with a negative budget, as a result of which expenditure after debt counseling and budget counseling was still higher than income, also increased in December.
Richard Lane, director of external affairs at StepChange, said: “December’s increase in the share of new StepChange customers in arrears on priority debts such as gas, mortgage payments and council tax, combined with a month-on-month increase in the share of new customers unable to make ends meet is a matter of great concern to us.
“We’ve had an exceptionally busy start to 2023 and while January is always a busy month, the relentless demands of the cost of living crisis on people’s finances are clearly forcing more and more people into trouble.”