Personal insolvencies soar to highest level in a year

Some 26,030 people went insolvent in England and Wales in the
third quarter

Personal insolvencies have edged up to their highest levels in a year, official figures have shown.

Some 26,030 people went insolvent in England and Wales in the third quarter, although this number is still 7% lower than the same period a year ago, according to Insolvency Service figures.

The rise was driven by a sharp increase in individual voluntary arrangements (IVAs), which are agreements with creditors to pay back all or part of the debts, usually over a period lasting around five years.

The two other types of formal personal insolvency - bankruptcies and debt relief orders (DROs) - continued to drift downwards.

The number of people being tipped into personal insolvency had reached a five-year low of just over 25,000 in the first quarter of 2013, but the figures have been edging up slightly since then and the latest total marks a 1% increase on the second quarter.

Some 76,763 people have become insolvent this year so far. Despite the recent uplift in the figures, if they remain broadly the same into winter it will still mean that the overall total for this year comes in lower than the 109,000 people who went insolvent in 2012. Last year's total was the lowest annual figure recorded since 2008.

Within the new figures, there were 13,394 IVAs recorded, marking a 6% increase on the same period last year and the highest number seen in more than three years.

Some experts have suggested that on the face of it, the rising proportion of people opting for IVAs and trying to pay some money back rather than simply declaring themselves bankrupt is a sign that confidence in the economy is improving.

But they have also pointed out that it could be a sign that some people who have been previously juggling their debts are now finding the squeeze on their income too much to bear, which is forcing them into doing a deal with their creditors.

The number of people being declared bankrupt continued to run at its lowest levels in more than a decade in the latest figures.

Some 6,004 bankruptcies were recorded in the third quarter, which is down by one fifth (21%) on a year ago and marks the lowest number since winter 2002.

Bankruptcies, which are often seen as a "last resort", have been in general decline since the introduction of DROs in 2009, which are often dubbed "bankruptcy light". DROs are aimed at people with debt of less than £15,000 but no realistic prospect of paying it off.

Some 6,632 DROs were recorded in the third quarter, which is 15% down on a year ago and the lowest figure seen in almost three years.

Experts said that the official figures do not reflect the full extent to which people are struggling to manage their debts, particularly in light of the recent round of hikes announced to energy bills.

Phillip Sykes, deputy vice-president of insolvency trade body R3, said the figures are an indication of a "mixed picture", with on the one hand personal insolvencies running at lower levels than last year and on the other, a "boom" in people turning to IVAs.

Mr Sykes said that IVAs are only suitable for people with reasonable levels of spare income or assets such as equity in the family home.

He said: "Ordinarily, most people will use a recession and recovery to pay down debts, and record low interest rates should be helping with that."

Referring to R3's own research into how people are coping financially, Mr Sykes said: "The rising cost of living has been a major concern over the past year for those that struggle to payday, while optimism about personal finances remains low.

"Although the economy is returning to growth, some people may be left behind."

Mark Sands, personal insolvency partner at Baker Tilly said: "The increased proportion of people in debt choosing to commit to a five year payment plan using an IVA is telling, as it suggests people are increasingly confident about the prospects for the economy."

But he said that personal insolvency rates generally will continue to come under pressure from stagnant wages and the possibility of any slight future rise in interest rates which could add to borrowing costs and "tip many people over the edge".

PA

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

News
Ben Little, right, is a Labour supporter while Jonathan Rogers supports the Green Party
general election 2015
News
The 91st Hakone Ekiden Qualifier at Showa Kinen Park, Tokyo, 2014
news
Life and Style
Former helicopter pilot Major Tim Peake will become the first UK astronaut in space for over 20 years
food + drinkNothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
News
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
Sport
Alexis Sanchez celebrates scoring a second for Arsenal against Reading
football
Life and Style
health
Voices
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
News
i100
News
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
news
Life and Style
Buyers of secondhand cars are searching out shades last seen in cop show ‘The Sweeney’
motoringFlares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

    Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

    £50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

    Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

    £13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

    Ashdown Group: Training Programme Manager - City, London

    £40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

    Day In a Page

    NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

    Who's monitoring the outsourced NHS services?

    A report finds that private firms are not being properly assessed for their quality of care
    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
    How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

    How do Greeks feel about Syriza?

    Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
    From Iraq to Libya and Syria: The wars that come back to haunt us

    The wars that come back to haunt us

    David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
    Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

    Too busy to surf? Head to The Pool

    A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
    Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

    UK's Major Tum to blast off on a spice odyssey

    Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
    John Harrison's 'longitude' clock sets new record - 300 years on

    ‘Longitude’ clock sets new record - 300 years on

    Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
    Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

    Let the propaganda wars begin - again

    'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
    Why Japan's incredible long-distance runners will never win the London Marathon

    Japan's incredible long-distance runners

    Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
    Why does Tom Drury remain the greatest writer you've never heard of?

    Tom Drury: The quiet American

    His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
    You should judge a person by how they peel a potato

    You should judge a person by how they peel a potato

    Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
    Beige is back: The drab car colours of the 1970s are proving popular again

    Beige to the future

    Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
    Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

    Bill Granger cooks with fresh cheeses

    More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
    Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

    Shay Given: 'This FA Cup run has been wonderful'

    The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
    Timeless drama of Championship race in league of its own - Michael Calvin

    Michael Calvin's Last Word

    Timeless drama of Championship race in league of its own