Living beyond means, relationship breakdowns, and cuts to incomes were the leading causes of bankruptcy in 2015

21 December 2016

Living beyond means, relationship breakdowns, and reduced levels of income were the leading causes of bankruptcy in 2015, according to new government statistics.

R3, the insolvency trade body, says the statistics also reveal significant differences between the reasons why men and women enter bankruptcy.

One-third (34%) of men's bankruptcies in 2015 were caused by the bankrupt's own company running into financial problems, compared to just 13% of women's bankruptcies. Overall, 26% of bankruptcies were caused by ‘trading' issues.

In total, 3,005 men's bankruptcies and 795 women's bankruptcies were caused by trading problems in 2015, while, 5,915 men's bankruptcies and 5,180 women's bankruptcies were caused by non-trading problems.

The most common single cause of men's bankruptcies in 2015 was ‘living beyond means' (approx. 995 bankruptcies), closely followed by ‘management failure' at their own company (990), and the bankrupt's loss of their job (920).

The most common single cause of women's bankruptcies in 2015 was ‘living beyond means' (1,110), ‘relationship breakdown' (1,075), and the loss of or a significant reduction in household income (750).

R3 spokesperson Cathryn Williams says: "Living beyond means is an issue that affects men and women in pretty equal measure and it is no surprise that it is the leading cause of bankruptcy. Careful budgeting and seeking early professional advice - rather than getting deeper into debt - can help."

"The notable thing about the statistics is how they demonstrate the different financial situations men and women face. For men in particular, it's often the failure of their business or the 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."

In 2014, the leading causes of bankruptcy were ‘living beyond means' (approx. 2,540 bankruptcies), ‘relationship breakdown' (2,250), and significant reduction in the bankrupt's income (1,925).

For men, the leading causes of bankruptcy in 2014 were ‘loss of bankrupt's employment' (1,275), ‘loss of market' by their company (1,240), and ‘living beyond means' (1,210).

For women, the leading causes of bankruptcy in 2014 were ‘relationship breakdown' (1,420), ‘living beyond means' (1,330), and the loss of or a significant reduction in household income (1,145).

Similarly to 2015, 33% of men's bankruptcies in 2014 were caused by trading-related problems, as were 14% of women's bankruptcies. Overall, 25% of all bankruptcies in 2014 were caused by trading-related problems.

Cathryn Williams adds: "Bankruptcy numbers have fallen steadily in recent years due to changes in the economy and a reduced number of insolvencies generally. The reduction in bankruptcy numbers is more prevalent in men - whilst bankruptcies for both men and women have fallen since the financial crisis, the number of men's bankruptcies has dropped much faster and women are now more likely than men to enter a form of insolvency".

The other statutory insolvency procedures (not included in these numbers) are Individual Voluntary Arrangements and Debt Relief Orders.

R3 published a report on gender and insolvency - ‘Closing the Gap' - in June 2016, which is available here.

NT = Not Trading-related; T = Trading-related

Official statistics available here.