Different causes of men’s and women’s bankruptcies revealed by new R3 report

20 June 2016

A new report from insolvency trade body R3 sheds light on the stark differences between the factors that cause men and women to enter bankruptcy.

Using statistics obtained from the Insolvency Service, R3 reveals that the most common causes of bankruptcy among men include job loss or business failure, while the most common causes of women's bankruptcies include relationship breakdowns or the loss of a partner's income.

‘Over-spending' is a common cause of bankruptcy among both men and women.

The top three causes of bankruptcy among men in 2014 (latest data) were, in descending order: the loss of the bankrupt's employment, a loss of market by their business, and ‘living beyond means'.

For women, the top three causes of bankruptcy were: relationship breakdown, living beyond means, and a significant reduction in household income.

R3's president, Andrew Tate, says: "Insolvency statistics are a window onto the wider economy, and the bankruptcy figures show that traditional differences between men's and women's roles in the economy persist. In one way, these statistics make for depressing reading."

"Although men are more likely than women to enter bankruptcy, certain groups of women are acutely affected."

The data show that the single most common ‘type' of bankruptcy in 2014 was a woman's bankruptcy caused by a relationship breakdown.

In 2014, there were 20,336 bankruptcies, of which 12,119 involved a man and 8,131 involved a woman (the rest are unknown). Approximately 1,420 of these involved a woman whose relationship had broken down.

The most common cause of bankruptcy among men was the loss of their own job, which caused approximately 1,275 bankruptcies (and 640 among women).

Andrew Tate adds: "Bankruptcy is the least common type of formal insolvency. It is generally associated with people with higher levels of debts or assets and can be an appropriate tool for dealing with a drastic situation such as a large or sudden drop in income caused by job loss or business failure. Men are still more likely to be the main earner in a household or to own a business, and the bankruptcy statistics reflect this."

"Women are far more likely than men to enter a Debt Relief Order (DRO), which is designed for those with very low incomes, debts or assets. In part, thanks to the introduction of DROs in 2009, overall, women are now more likely to enter an insolvency procedure than men."

Overall, there were 98,338 total insolvencies in 2014, of which 46,758 involved a man and 51,473 involved a woman.

Andrew Tate adds: "The stereotypical idea that women struggle more than men with casual over-spending is misleading. Looking at bankruptcies alone, men and women both struggle with keeping a lid on their outgoings. Overall, if women are now more prone to insolvency, it's more likely to be linked to the fact that they have lower levels of assets or incomes to live on than male counterparts. It's much easier to ‘over-spend' in this situation."

Every bankruptcy case is assigned a cause by the Insolvency Service from a list of 17 factors.

Men's bankruptcies are more likely to be caused by a wider number of factors than women's: the top three causes of men's bankruptcies accounted for only a third of all male bankruptcies, while the top three causes of women's bankruptcies accounted for over half the total.

With the exceptions such as ‘living beyond means', the causes of bankruptcy that have a relatively bigger impact on men tend to have a relatively lower impact on women, and vice versa:

• Business failure-related bankruptcies accounted for roughly one-in-three men's bankruptcies in 2014, but only one-in-seven women's bankruptcies.
• The top cause of bankruptcy for men - the loss of employment - was only the 6th most common cause of bankruptcy for women.
• Relationship breakdown was the number one cause of women's bankruptcies in 2014 but it was only the 8th most common cause of bankruptcies among men.
• The top three causes of women's bankruptcies (relationship breakdown, living beyond means, and reduction in household income) were the only factors that affected more women than men.

NB. Numbers have been rounded by the Insolvency Service to protect confidentiality. Cases with unknown causes are not included.

The findings are taken from R3's new report 'Closing the Gap: Gender and the Changing Demographics of Insolvency'.