If you’ve felt like your money just doesn’t go as far as it used to, you’re definitely not alone. From rising bills to higher interest rates, 2025 has been another tough year for household finances across the UK. The cost-of-living crisis may no longer be front-page news every day, but it’s still very much part of people’s everyday reality, and it’s affecting everything from how we shop, save and even plan for the future. In this blog, we’ll take a closer look at what’s happening with household debt & insolvencies in the UK right now – why it’s happening, who’s being affected and what can be done if you’re struggling. Whether you’re just starting to feel the pressure or already deep in it, you’re not alone, and support is available.
Everyday costs are still climbing
While inflation has slowed a little compared to previous years, it hasn’t exactly gone away. Food prices are still high, rent and mortgage payments have jumped, and energy bills, while slightly lower than last year, are still causing stress for many.
The problem is that wages haven’t kept up. Most people are still earning roughly the same while their costs keep rising. That’s pushed a lot of families to lean on credit cards, overdrafts and even buy-now-pay-later schemes just to get by. It’s become a juggling act for many, with less and less room for error.
Unsecured debt is at an all-time high
Unsecured debt – like credit cards, personal loans and payday loans – is growing quickly in 2025. More people are using credit to get by, not for big purchases, but to cover everyday essentials like food, bills and travel. And with interest rates still reasonably high, it’s getting harder to keep up with repayments, let alone clear the balance.
Behind every debt is a real person trying to make ends meet. For many, borrowing has become a way to bridge the gap between paydays. Over time, though, that short-term fix can turn into a long-term struggle. The pressure mounts up, and it can feel like there’s no way out. That’s why more people are now turning to formal debt solutions like IVAs and DROs to get back on track and take some of the load off. Reaching out for help early can make a big difference.
Where you live matters
Financial struggles aren’t the same everywhere in the UK. People in some regions are finding it more challenging than others. Personal insolvency rates are higher in areas like the North East, parts of Wales and the Midlands, mainly due to lower average wages and fewer financial safety nets.
Meanwhile, while costs are higher in London and the South East, more people have equity in their homes or access to better-paying jobs, which makes a difference when managing debt. But wherever you’re based, the squeeze on household budgets is real and growing.
More people are turning to insolvency
One of the most evident signs of financial hardship at present is the rise in personal insolvencies. In January, personal insolvencies across England and Wales rose by 12% compared to the same time last year. These figures include bankruptcies, Debt Relief Orders (DROs), and Individual Voluntary Arrangements (IVAs) – all formal solutions used when people can no longer manage their debts.
IVAs are the go-to option for people with a regular income who can afford to repay some of what they owe over time. DROs are better suited for those with smaller debts, low income and few assets. While often seen as a last resort, bankruptcy can be the quickest way to wipe the slate clean if there’s no realistic way to pay off debts.
The good news? More people are asking for help sooner, which means they have more options and less stress. The earlier you reach out, the easier it is to find a way forward. You don’t have to deal with it all on your own.
The hidden impact
Dealing with debt doesn’t just affect your bank balance – it takes a real toll on your mental health, too. Constant money worries can cause anxiety, sleep problems and even impact relationships. Research carried out last night by YouGov on behalf of StepChange Debt Charity found that almost half (49%) of people struggling with debt reported a decline in mental well-being.
That’s why it’s so important to know you’re not alone and that support is out there. Facing debt can feel overwhelming, but with the right help, things can get better.
Getting the right support makes all the difference
When things feel out of control, speaking to someone who knows what they’re doing can be a game-changer. Qualified Insolvency Practitioners can help you understand your options and find the best way forward – whether to manage your personal debt or close down a struggling business.
The good news is that help doesn’t have to cost you anything. A proper debt adviser will give you honest, impartial advice, tailored to your situation, not just push you towards one solution. Getting advice early often means you have more options to choose from.
What’s next?
There’s hope that things will start to look up as inflation continues to ease and wages begin to catch up. But for now, the financial strain many households are under isn’t going away anytime soon. Household debt & insolvencies will remain a major concern for thousands of people across the UK well into 2026.
That’s why it’s more important than ever to have open conversations about money, get advice when needed, and not struggle in silence. Whether you’re feeling the pinch now or are already in over your head, there’s a way out.
Need some help? You’re in the right place
We’re here to guide you if you’re unsure about the best way forward. Our experienced Insolvency Practitioners are fully authorised by the Institute of Chartered Accountants in England and Wales and offer free, no-obligation advice unique to your circumstances. Whether you’re considering closing your business or exploring your options, we’ll help you find the most cost-effective and stress-free solution. Get in touch using the form below, live chat with us, email mail@Simpleliquidation.co.uk, or call us on 0800 246 5895 – we’re always happy to help.
