Vulnerability and mental health issues in the world of insolvency

Jul 5, 2023

I will be astounded if, by now, if there are many readers of Recovery who are not aware of the increasing concern around mental health issues in our society. Rightly, in my view, awareness is being raised, people are sharing their experiences, and help is being offered and signposted. Mental health issues are being talked about.

From the perspective of the insolvency profession – do these issues matter? In my view a resounding and unequivocal yes. In this article I will briefly explain why that is, what we need to be aware of, what we perhaps can do differently (and some of you will be doing this already), and where we can turn for further information and guidance. However, I offer no silver bullet – just some thoughts to raise awareness and some suggestions on where to find help and what we can all do.

The FCA defines a vulnerable consumer (but in my view this can apply to anyone in debt) as “….someone who, due to their personal circumstances, is especially susceptible to harm….”.  I accept that in many cases that will involve a subjective assessment, especially as there are other varying definitions of vulnerability.

The debtor

Perhaps the most obvious place to start is an individual in debt, who we may come across for example when acting as a Trustee in Bankruptcy, when putting in place or supervising an IVA, advising a debtor on their options, or when acting for a spouse of a debtor.

How are you to know if someone is vulnerable or suffering from mental health issues? In some cases, they may simply tell you, which would be great.  In my experience however, life is never as simple as that. Poor health, life events such as job loss or a bereavement, or poor financial literacy or digital skills are some drivers of vulnerability and risk indicators, and these are situations and comments we can all be alert to.

It should also be borne in mind that one in seven adults has literacy skills that are expected of a child of 11 or below and that in any given year, one in four adults experiences at least one mental disorder.

The director

Many of us will more often deal with a director of an insolvent company than an individual seeking advice / in bankruptcy. In every corporate insolvency there will be one or more directors, as well as employees, creditors and others affected by the insolvency who are individual people. They are just as likely to be vulnerable or facing mental health issues as individuals in debt.

The insolvency professional

My 35 years of experience as an insolvency practitioner have perhaps left me hardened, with a thicker skin than when I started, and with a degree in cynicism. Even so, I have feelings and care about what is going on around me. Each IP is an individual (until firm licencing comes in?) and each works with a team of individuals (until AI takes over?). We cannot ignore the impact that our cases have on our colleagues and on ourselves, whether that is as a result of the cases we are working on, or the impact on us of helping, or dealing with, vulnerable individuals.

Many of us will have been subject to abusive calls and emails, which will often leave us feeling bruised and upset, and perhaps angry. Some of us will have dealt with individuals who have told us how bad our actions are making them feel, and in some cases have threatened self-harm or to take their own life. Of course you will be looking for ways to help those individuals. But at the same time we should be mindful of the impact those exchanges can have on us too –members of the insolvency profession, doing a job, and needing support and guidance when faced with stressful situations. Dealing with sensitive or difficult issues can be frightening and demoralising for your team.

Tips on communication

It can help when dealing with vulnerable people to consider changing your communication style and approach. My tips in these situations include:

  • Consider which form of communication may work best for the person: in-person meeting, video call, telephone call, email, text or webchat. Everyone is different.
  • Plan any calls or meetings at the time which works best for the person. For instance, if someone has to take some medication at a certain time, this can leave an immediate impact on that person’s mood etc.
  • Try to identify if the person relies on someone, such as a carer or friend, and ask if the person would like them to join the call or meeting.
  • Speak clearly, neither too fast or too slow, and neither too loud or too quietly;
  • After you finish explaining each issue or point, pause and give the person plenty of time to absorb it and ask questions to clarify what you have said. Then consider perhaps also summarising the point again before moving on to the next issue.
  • Offer to provide a note of the call or meeting.

The courts

There have been a number of recently reported cases which have looked at mental health issues. These cases clearly demonstrate that an IP does not simply have to stop doing their job when mental health and vulnerability issues are identified, and they give comfort that, when a carefully considered approach is taken and explained to the court then, when appropriate, the courts will not only allow IPs to continue with their job, but support them in doing so.

Here are the cases and the key point in each.

  • Re Djurberg (a bankrupt); Hyde and another v Djurberg [2022] EWHC 1534 (Ch): A search and seizure order was granted after careful consideration of vulnerability issues. The bankrupt claimed to lack capacity and the court found that he did not, but then had to consider his mental health in the context of the proposed action. The court noted that if the bankrupt cooperated then the actions would not be needed and would not impact on his mental health.
  • Re De Freitas; Revenue and Customs Commissioners v De Freitas [2022] EWHC 1946 (Ch): A bankruptcy petition was not dismissed despite the mental health of the debtor, as the petitioner (a public body) had complied with its public sector equality duty;
  • Nihal Mohammed Kamal Brake & Anor v Geoffrey William Guy & Ors [2022] EWHC 2797: the debtor entered a mental health crisis moratorium. A creditor sought to enforce a third party debt order. The court explored the three tests set out in the regulations: reasonableness, detriment and ensuring that the protection provided by a moratorium was not undermined.  The court was satisfied that on the facts of the case the three tests were met and the court would use its discretion to allow enforcement to continue;
  • IV Fund Limited SAC v Frank James Mountain [2021] EWHC 2870 (Ch): A mental health crisis moratorium can be cancelled if either there is a material irregularity with the application for the moratorium, or on the grounds of unfair prejudice. A creditor had presented a petition for bankruptcy which had been expedited on the grounds of the risk of dissipation of assets. The moratorium unfairly prejudiced the creditor and so the moratorium was cancelled;
  • Kaye v Lees [2022] EWHC 3326 (KB): A creditor challenge to a mental health crisis moratorium failed as the application was out of time. The court has no discretion, even where the facts of the case may make the barring of a challenge as seeming unfair, as the timings in the regulations are prescriptive.

Sources of information and advice

At the foot of this article are links to sources of guidance and information.  There is also a wealth of knowledge and experience among colleagues and contacts.  I believe we can all learn from those who have direct experience of these issues and can (when appropriate) turn to them for help.

As a profession, please can we all share experiences, even frustrations, most importantly solutions and positive outcomes, and where we have found help and guidance?  That way we can help each other, as well as the people we come into contact with who need our help and, on occasion, understanding.

What should we do?

Vulnerability and mental health issues are increasingly at the heart of what we do. Being aware of, and alert to, these issues can help us all do our job in a more effective, and appropriate way.  Those we advise or come up against, as well as our colleagues and peers, will thank us for taking a taking a more enlightened approach.  I believe we should take pride in what we do, especially when how we do it makes a difference to a vulnerable person. 

Mark Sands is a licensed insolvency practitioner and head of insolvency at Apex Litigation Finance

Sources of further information:


Citizens advice –

Stepchange –

Mental Capacity Act 2005 –

R3 are planning to offer a course on mental health first aider training, a discussion forum and a webinar.

FCA – four drivers of vulnerability:

Health – health conditions or illnesses that affect ability to carry out day to day tasks;
Life events – such as bereavement, job loss or relationship breakdown;
Resilience – low ability to withstand financial or emotional shocks;
Capability – low knowledge of or confidence in managing financial matters or low literacy or digital skills.

FCA’s guidance on risk indicators:

Phrases such as I can’t understand the letter you sent me, shortness of breath, agitation, asking for repetition, signs of confusion and mention of medication
Low literacy skills
Mental health problems
Disabilities and long-term illnesses
Change in circumstances, including both financial and relationship, bereavement and the diagnosis of a serious illness
Lack of English language skills


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