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Christmas on Credit - UK Personal Insolvencies

With the UK festive season now merrily in swing, credit cards maxed out on Black Friday and Cyber Monday bargains and Christmas shopping well under way, will the lure of the Christmas spirit be enough to tip some people over the edge into unmanageable debt?

For many the holiday season is a time to adopt a laissez-faire attitude to spending (and waistlines for that matter). However, come the New Year the financial hangover will still be lingering, well after the frivolities have worn off.Frustrated Santa Claus. Christmas and many problems.

With UK personal insolvencies increasing noticeably throughout 2016, it could be that following Christmas 2016 we will be faced with ever increasing numbers of personal insolvencies into 2017. The insolvency rule changes introduced in April 2016 cutting the cost of bankruptcy has seen more people declaring themselves bankrupt. The rule changes mean that people can now apply for their own bankruptcy online rather than through Court proceedings, which has perhaps been the barrier in the past. Now the perceived stigma has been removed it seems more individuals are declaring themselves bankrupt and are seeing this as an easy way out of debt.

The BBC recently reported that bankruptcy has risen 7% in the third quarter of 2016 compared with last year, with 1 in 515 UK adults now becoming insolvent. It also seems that there has been an increase in the number of IVAs, with the Insolvency Service reporting a 29% increase from last year. Taking all forms of personal insolvency into account, the BBC reported that a total of 24,251 people were declared insolvent in England and Wales in the third quarter of this year. It seems that young women are the major culprits, with the accountancy firm Moore Stephens publishing statistics that women under the age of 25 made up 65% of personal insolvencies last year, and suggesting that women are a particular target for some payday lenders.

Whilst the National Living Wage was introduced in April this year it seems that personal insolvencies are still on the increase. It could be that we are yet to see the effect of the National Living Wage as people have for too long been bridging their finance gap with over reliance on consumer credit, making paying off debts a near impossibility. Joanna Elso, Chief Executive of the Money Advice Trust, the charity that runs the National Debt Line, reported that ‘the gradual erosion of some families’ surplus income in the face of rising prices has led to a new generation of debt problems, one to which people are vulnerable, one which is harder to resolve and one which has no definitive solution’.

With the personal insolvency figures for the third quarter of 2016 showing a continuing increase it seems that many could be in for a rocky ride into 2017. With retailers encouraging festive spending and families and friends perhaps expecting lavish presents and meals, Christmas could be the final straw for some who may still be struggling to pay off last Christmas’ debt.

It was reported by the Bank of England that UK families borrowed a staggering £1.5 billion through a combination of loans and credit cards last year in the run up to Christmas. Grant Thornton has reported that they ‘regularly see people, especially over Christmas and with the start of the sales, add to their problems in quite a substantial way’, evidencing that Christmas can exacerbate the already spiraling problem for many.

So watch out for the Grinch this Christmas, we hear he likes shiny plastic cards full of credit.

Bah humbug. Ebenezer Scrooge.


© Copyright 2017 Squire Patton Boggs (US) LLP


About this Author

Jennifer Jones, Squire Patton Boggs, UK Insolvency litigation Lawyer, Corporate Restructuring Attorney

Jennifer Jones is an associate in the Restructuring & Insolvency Practice Group in our Leeds office. Jennifer provides contentious and non-contentious insolvency advice to banks, insolvency practitioners, companies and creditors.

In particular, Jennifer is experienced in non-contentious insolvency work including security reviews for banks and undertaking a variety of work for Law of Property Act receivers and administrators. 

Jennifer is involved with a number of programmes run at local schools for the Business in...

44 113 284 7175
John Alderton, Insolvency and Restructuring, Business Lawyer

John is the Managing Partner of our Leeds office. His particular expertise covers restructuring, reorganisation and business support, lender security reviews and enhancement as well as contentious and non-contentious insolvency and cross-border issues.

John advises banks and other financiers, insolvency practitioners and other insolvency professionals, directors and management teams as well as creditors on all issues arising in stressed and distressed scenarios both within the UK and cross-border.

Chambers UK describes John as “practical and pragmatic”.  Commentators say he “focuses on the end result”. The Legal 500 UK says John is “Amongst the most commercial insolvency lawyers in Leeds”

John is listed in the 2013 edition of Chambers UK as a leading individual for restructuring and insolvency.

44 113 284 7026