Insolvencies drop by 6 per cent on last year

Some 6,469 bankruptcy orders were recorded in the second quarter of this year

There were 25,717 personal insolvencies in England and Wales in the second quarter of 2013, dropping by 6% on the same period a year ago but slightly up on a five-year low recorded in the previous quarter, Insolvency Service figures show.

Some 6,469 bankruptcy orders were recorded in the second quarter of this year, putting them one fifth lower than a year ago.

Bankruptcies are often seen as a "last resort" and their use has generally dropped off since the introduction of a newer type of insolvency called a debt relief order (DRO), which is aimed at people with lower levels of debt but no realistic prospect of paying it off.

Around one quarter of bankruptcy orders involve people who are self-employed, which is a bigger proportion compared with previous years due to a decline in cases involving people who are not traders, the Insolvency Service said.

The recent upturn in personal insolvencies was driven by a rise in individual voluntary arrangements (IVAs), which are agreements for people to pay back as much as they can into a pot which is shared out between creditors.

There were 12,116 IVAs recorded during the second quarter, marking a 9% increase on the first three months of 2013.

DROs, which are often dubbed "bankruptcy light", fell back to their lowest levels in more than two years. Their numbers dropped by 1% on the previous quarter, with 7,132 recorded.

The figures were released as a major report from Government-backed body the Money Advice Service (MAS) warned more than half of UK adults are struggling with their finances.

An estimated 26 million people are living on the edge, showing an increase of around nine million adults since similar research was carried out in 2006.

Alec Pillmoor, Baker Tilly's head of personal Insolvency, said the official figures mask the “very real financial struggle” that many families are still facing.

The figures do not include the number of people who have entered into debt management plans.

Mr Pillmoor said: “Inflation has been running at a higher level than the increase in earnings for the last three years.”

Matthew Chadwick, head of personal insolvency at accountancy firm BDO, said the fact that the quarterly figures are still close to their five-year low shows the “continuing resilience” of households struggling to balance their debts and outgoings.

He pointed to some positive signs on the horizon from news that confidence is returning to the housing market and the economy has been growing.

However, he cautioned that the recent increases seen in house prices could make it more attractive for creditors to pursue their debts more vigorously.

Low interest rates have helped borrowers to keep their costs down in the tough economy and last year saw the lowest annual number of personal insolvencies across England and Wales since 2008.

Mr Chadwick continued: “Government and the Bank of England will be reluctant to make drastic changes, so any increases in personal insolvency levels linked to interest rate rises are likely to be gradual.”

Phillip Sykes, deputy vice-president of insolvency trade body R3, said rules which often make it hard for people to enter a formal insolvency process should be changed.

IVAs do not have the same “fee barrier” as bankruptcies, but they need to be agreed by creditors, which is “easier said than done”, he said.

Mr Sykes said: “Frequently, insolvent individuals cannot afford the fees to enter bankruptcy, but they have too much debt or assets to qualify for alternatives like debt relief orders.

“This leaves the debtor caught in the middle, exposed to their creditors. Action needs to be taken by the Government to reduce the number of people in this situation by looking at payment by instalments for bankruptcy and amending the thresholds for entry into debt relief orders.”

PA

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
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.

iJobs Job Widget
iJobs General

MBDA UK Ltd: Mission Planning and Control Solutions Systems Engineer

Competitive salary & benefits: MBDA UK Ltd: What’s the opportunity? A pro-act...

MBDA UK Ltd: System Design Capability

Competitive salary & benefits: MBDA UK Ltd: What’s the opportunity? The small...

Recruitment Genius: Time Served Fabricator / Welders - Immediate Start

£25000 - £35000 per annum: Recruitment Genius: Fabricator welder required for ...

Recruitment Genius: Inbound Customer Service Advisors

£14564 - £15311 per annum: Recruitment Genius: Inbound Customer Service Adviso...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific