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12/11/2015

Half of British adults believe insolvency ‘stigma’ has fallen – R3

  • Less than half of British adults (48%) say there is a ‘social stigma’ attached to entering insolvency
 
Half of British adults (50%) believe the ‘social stigma’ attached to entering an insolvency procedure has fallen over the last decade, according to research by insolvency trade body R3 and ComRes.
 
Less than half (48%) of British adults currently believe there is a stigma attached to entering an insolvency procedure.
 
Phillip Sykes, President of R3, says: “The idea of ‘stigma’ around entering an insolvency procedure is a real deterrent to people dealing with problem debt. It’s very welcome that there is an increasingly non-judgemental attitude to people entering an insolvency procedure.”
 
“People can end up with unmanageable debts for all sorts of reasons. What’s most important is that if you have a debt problem, you seek early advice to find a solution. This increases the number of options available to find the most effective solution for debtors and their creditors.”
 
The research also found that only 37% of British adults see entering an insolvency procedure as ‘an easy way out’ from having to repay debts. And, only 37% of British adults agree that someone’s insolvency is more likely to be caused by their own reckless spending than a factor outside of their control.
 
Over half (51%) of British adults agree that entering an insolvency procedure can be an opportunity for a fresh start.
 
Phillip Sykes continues: “The fall in stigma is undoubtedly linked to the enormous rise in consumer debt and personal insolvencies since the turn of the century. This has made the idea of entering insolvency less unusual, which, in turn, may have made people less reluctant to use an insolvency procedure to deal with unmanageable debts.”
 
In 2000, there were 29,000 personal insolvencies, or 7.2 for every 10,000 adults. In 2014, there were 98,000 personal insolvencies, or 21.8 for every 10,000 adults.
 
Over the same period, personal insolvency options have expanded beyond bankruptcy. Entry to Individual Voluntary Arrangements was simplified in 2003 and Debt Relief Orders were introduced in 2009.
 
Phillip Sykes adds: “The insolvency regime is there to provide a balance between creditors and those in debt. On the one hand it provides debt relief to those who are struggling. But on the other, it helps creditors see more of their money back than they otherwise would have done. There are sanctions for those who have recklessly accumulated debt too.”
 
“The fact that there is less stigma around insolvency shouldn’t encourage people to rack up debt. It just means there are fewer barriers to dealing with problem debt when it does occur.”
 
 
Views of social stigma different to personal judgements
 
Older people are the least likely to say there is a social stigma attached to entering an insolvency procedure: only 44% of over-65s believe there is a stigma compared to 52% of those aged 25-34 (the age group most likely to say there is a stigma).
 
However, older age groups are the most likely to hold critical views about those entering insolvency. 42% of those aged 55-64 and 41% of those aged over 65 believe an insolvency procedure is ‘an easy way out’ from having to repay debts, while 40% of those aged 55-64 say an insolvency is more likely to be caused by an individual’s reckless spending than a factor outside of their control.
 
Phillip Sykes comments: “Older age groups are among the least likely to face insolvency themselves. It may be that, from afar, insolvency is seen as an ‘easy’ option. It’s a concern that those most likely to need an insolvency procedure are more likely to believe there is a stigma.”
 
Only 29% of British adults said they had a ‘good’ understanding of what happens when an individual enters an insolvency procedure.
 
Phillip Sykes adds: “Financial education needs to be improved. It’s frustrating when people don’t consider the insolvency options because they aren’t clear about what’s involved. We need to work to break down barriers that deter people from getting the right advice and the right solution for their situation.”
 
 

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see www.r3.org.uk for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
     
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.