INDIVIDUAL insolvencies were up 18% last month, with experts saying the worrying spike is evidence of the relentless pressure households are under due to higher interest rates, historical uncleared debt and stubborn inflation, with many people now at “breaking point”.
According to new data published this morning by The Insolvency Service, in February 2026, 11,609 individual insolvencies were registered in England and Wales. This was 18% higher than in February 2025, and 6% higher than in January 2026.
The individual insolvencies consisted of 768 bankruptcies, 4,210 debt relief orders (DROs) and 6,631 individual voluntary arrangements (IVAs).
The number of DROs in February 2026 was a record high in the monthly time series going back to their introduction in 2009, exceeding the previous high of 4,185 in August 2025.
Monthly DRO numbers over the past two years have been higher than at any other point since their introduction, following the removal of a fee for entering a DRO in April 2024.
The number of IVAs was higher than both January 2026 and the 2025 monthly average. Bankruptcies were 25% higher than in February 2025, although numbers were affected by the clearing of a backlog following the Insolvency Service moving to a new case management system.
Additionally, the number of registered company insolvencies in England and Wales was 1,878 in February 2026, 7% higher than in January 2026 (1,749), but 7% lower than the same month in the previous year (2,015 in February 2025), according to separate data from The Insolvency Service.
Monthly numbers of company insolvencies at the end of 2025 and the start of 2026 were lower than levels typically seen between 2022 and 2025.
“Breaking point”
Darryl Dhoffer, Founder at Bedford-based The Mortgage Geezer, a broker with a strong focus on those with adverse credit, said “these figures signal that many households are at breaking point”.
He continued: “A record 4,210 DROs suggests the most vulnerable have hit a wall, while the 18% annual jump in individual insolvencies shows the ‘lag effect’ of high rates finally hitting middle-income earners.
“Though company insolvency figures are below 2024 peaks, the 7% monthly rise reflects thinning margins. If inflation ticks up, forcing the base rate higher, we’ll likely see “zombie companies” and over-leveraged households collapse as debt costs become untenable.”
Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, was also worried by the latest numbers: “This data highlights how many of our neighbours and local businesses are fighting for survival. Individual insolvencies surging by 18% is evidence of a deepening household finance crisis.
“Record-breaking Debt Relief Orders, 4,210 in total, tell the starkest story. Though partly driven by the removal of administrative fees, the sheer volume suggests many people are finally collapsing under accumulated debt from previous years.
“The risk of further deterioration remains high. Should inflation prove sticky or geopolitical shocks force the Bank of England to raise rates again, the refinancing wall for mortgages and business loans could become insurmountable.
“With margins already razor-thin and savings depleted, any renewed upward pressure on rates threatens a fresh wave of liquidations and defaults throughout 2026 and beyond.”
Human strain
Nouran Moustafa, Practice Principal & IFA at Roxton Wealth, is worried that things could deteriorate throughout 2026, all the more so given the fact interest rates now look far less likely to be cut due to the war in the Middle East triggering inflation.
She said: “We need to remember the real human strain under this data. These are not abstract individual insolvency numbers, they are people who have simply run out of room.
“On the business side, the picture is a bit more mixed, but a monthly rise in company insolvencies still tells you plenty of firms are operating without much cushion.
“What worries me is not just where we are now, but how fragile things still look underneath.
“The base rate is still 3.75% and inflation is still above target at 3%, so if inflation starts climbing again and rate cut hopes fade, pressure on household budgets and business cashflow could absolutely intensify.
“For me, this is less about one bad month and more about an economy where too many people and businesses are functioning with no real margin for error. Once that cushion is gone, it does not take much to tip someone over the edge.”
Underlying pressures
Anita Wright, Chartered Financial Planner at Ribble Wealth Management, wasn’t surprised by the data: “This is less a surprise and more a sign that underlying pressures are beginning to surface in the real economy. There is simply less liquidity in the system, meaning money is harder to access and more expensive to borrow.
“At the same time, bond yields are rising, which feeds directly into higher borrowing costs across business loans. Overlay that with a shift towards stagflation, where growth is weak, but prices remain stubbornly high, and it creates a particularly difficult environment to operate in.
“Many businesses can cope for a while by cutting costs, using cash reserves or delaying investment. However, that resilience is not indefinite. Once demand begins to soften, because consumers are also under pressure, and borrowing costs remain elevated, margins tighten quickly.
“At that point, the strain tends to show more clearly. Cashflow becomes more difficult to manage, refinancing becomes harder or more expensive, and ultimately the number of failures begins to rise.”
Business impact
Kate Underwood, Founder at Southampton-based Kate Underwood HR and Training, is worried about how the impact of debt can also feed through into the workplace.
She said: “Individual insolvencies being up 18% is thousands of people who can’t pay their bills anymore. And if you run a small business, this should worry you because when your staff are broke, it shows up at work.
“More stress, more mistakes, more sick days, and then they leave for an extra 50p an hour because they’re desperate.
“Small businesses can’t pay what big companies pay. We rely on people actually wanting to be there. But people can’t be loyal when they can’t afford their rent or mortgage. Company failures might be down a bit, but that means nothing when the people working for you are struggling to survive.
“Your team is your business. If they’re in trouble, so are you. And if prices keep going up, this gets a lot worse. Supporting your staff with money worries isn’t some nice extra anymore. It’s survival. If your people can’t afford to live, they won’t stick around.”
Photo by Jackson Simmer on Unsplash
