Money Advice Trust and Citizens Advice publish new Insolvency Report, as debt remedies need ‘major rethink’
Money Advice Trust and Citizens Advice propose a single, flexible insolvency model to support debt rehabilitation and financial resilience. The proposals aim to shape the next phase of the Insolvency Service’s review, offering a practical blueprint for long-term reform.
Posted July 9, 2025
Money Advice Trust and other leading debt charities are calling for a fundamental overhaul of the personal insolvency system in England and Wales, warning that current debt remedies are no longer working for people in crisis or for creditors.
In a new joint paper Citizens Advice and the Money Advice Trust set out a blueprint for a fairer, streamlined and more consistent system.
It comes as the Insolvency Service is set to explore options for significant structural reform as part of its ongoing review of insolvency. The report contains a practical template for a better, more effective system which offers people a positive route out of debt, calling for:
- A single point of entry into personal insolvency, accessed via a regulated debt advice provider.
- Repayment and write-off pathways depending on individual circumstances
- Flexibility to accommodate changes in individual circumstances while insolvent
- Supporting financial resilience by helping people rebuild stability and reducing the risk of future problem debt.
Data outlined in the report shows a disturbing trend of ‘negative budgets’ among debt advice clients, where households have less income than they need to cover their essential living costs. In 2024, 50% of Citizens Advice debt clients and 43% of National Debtline clients had a negative budget. Linked to this is the growth in household bill arrears - with energy arrears and council tax arrears now the second and third most common debts among people helped by National Debtline, run by the Money Advice Trust.
While Citizens Advice and the Money Advice Trust acknowledge there has been some progress, much more needs to be done to bring insolvency up to date, starting with fixing the complexity, strict eligibility criteria and inflexibility of the system that currently leave people trapped in unmanageable debt.
The charities have also highlighted their continued concerns about the Individual Voluntary Arrangement (IVA) market, following recent research by the Insolvency Service which found evidence of poor practice in 60% of IVA cases.
Grace Brownfield, Head of Influencing and Communications at Money Advice Trust said:
“An effective personal insolvency system is crucial in reducing the harm caused by problem debt, supporting returns to creditors where possible and giving people trapped in debt the opportunity of a fresh start.
“However, too often the current system falls short in achieving these important objectives. There is a clear need to move towards more fundamental reform of the current personal insolvency system – one which better reflects the realities of problem debt today and which does much more to support longer-term financial resilience.”
Anne Pardoe, Head of Policy at Citizens Advice said:
“People’s debt problems are deeper and more complex than ever before, but insolvency solutions haven’t changed with the times.
“Anyone struggling with debt should be able to access a fair and straightforward route to a fresh start. Instead, they’re faced with a patchwork of confusing and competing options.
“Fixing the insolvency framework is vital - not just for those in debt but for society as a whole. The government has a rare opportunity to rethink the system from the ground up. It must work with the advice sector to design and implement a system fit for the future."
Read the full report: Reimagining-Insolvency-Money-Advice-Trust-and-Citizens-Advice-July-2025.pdf
