Wednesday, 29 April 2009

Lightfoot Revisited - the changing face of UK personal insolvency law through the statistics

In R. v Lord Chancellor Ex p. Lightfoot [2000] Q.B. 597, Simon Brown L.J. (as he then was; pictured on the right in ermine in his capacity of a Lord of Appeal in Ordinary as Baron Brown of Eaton-under-Heywood) was able to say (at page 617) that:
"Some 20,000 bankruptcy orders are made each year."
If we note the table below we can see that he was only some 1,550 or so people out for the year in question (2000), but that he was roughly in the ball park. Perhaps the most important thing to take from his introductory comment is the relatively low number of individuals passing through the singular legal procedure that is bankruptcy in the year 2000 compared to 2008. Some eight years later there were 64,480 people who were declared bankrupt in 2008. This amounts to a threefold increase in redress to this so called relief and rehabilitation mechanism.

A perusal of the excellent insolvency statistics database at the Insolvency Service (IS) always makes interesting reading. I have reproduced here the historical table of personal insolvency since 1960. In retrospect the increase of redress to bankruptcy from 2004 makes uncomfortable reading for proponents of the reduction in automatic discharge movement. More work on the drivers of personal insolvency needs to be undertaken before we can definitively say whether or not the legislative change in the automatic discharge period or the over extension of credit argument is responsible for the hike in figures from 2004. 

The fact that Individual Voluntary Arrangements (IVAs) have experienced a similar upswing since 2004 could lend weight to the argument that it is the extension of credit driver that lays behind the increase in both procedures. Protagonists might however retort that this view is simplistic and that it does not take into account the rise of the so called 'IVA factories.'

With the recent increase in the Scottish personal insolvency statistics due to the LILA procedure, it looks as if the IS statisticians will be kept busy with the DRO procedure

INDIVIDUAL INSOLVENCIES IN ENGLAND AND WALES (1960-2008)
      Not Seasonally Adjusted  
               
Year Total Bankruptcy  Individual Deeds of
Orders Voluntary Arrangements
          Arrangements    
1960 3,220 2,944 : 276
1961 3,941 3,642 : 299
1962 4,602 4,273 : 329
1963 4,370 4,129 : 241
1964 3,766 3,552 : 214
1965 3,762 3,556 : 206
1966 4,062 3,862 : 200
1967 4,386 4,224 : 162
1968 4,298 4,150 : 148
1969 4,772 4,552 : 220
1970 5,087 4,907 : 180
1971 4,793 4,643 : 150
1972 4,337 4,244 : 93
1973 3,917 3,817 : 100
1974 5,718 5,608 : 110
1975 7,271 7,143 : 128
1976 7,207 7,108 : 99
1977 4,485 4,403 : 82
1978 3,902 3,826 : 76
1979 3,500 3,456 : 44
1980 4,038 3,986 : 52
1981 5,151 5,075 : 76
1982 5,700 5,654 : 46
1983 7,032 6,981 : 51
1984 8,229 8,178 : 51
1985 6,776 6,728 : 48
1986 7,155 7,093 : 62
1987 7,427 6,994 404 29
1988 8,507 7,717 779 11
1989 9,365 8,138 1,224 3
1990 13,987 12,058 1,927 2
1991 25,640 22,632 3,002 6
1992 36,794 32,106 4,686 2
1993 36,703 31,016 5,679 8
1994 30,739 25,634 5,103 2
1995 26,319 21,933 4,384 2
1996 26,271 21,803 4,466 2
1997 24,441 19,892 4,545 4
1998 24,549 19,647 4,901 1
1999 28,806 21,611 7,195 0
2000 29,528 21,550 7,978 0
2001 29,775 23,477 6,298 0
2002 30,587 24,292 6,295 0
2003 35,604 28,021 7,583 0
2004 46,650 35,898 10,751 1
2005 67,584 47,291 20,293 0
2006 107,288 62,956 44,332 0
2007 106,645 64,480 42,165 0
2008 p 106,544 67,428 39,116 0

Picture Credit: http://www.dodonline.co.uk/photos/26870.jpg 

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