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?
ebooks
ebooksAn introduction to the ground rules of British democracy
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

Recruitment Genius: Home Care / Support Workers

£7 - £10 per hour: Recruitment Genius: This care provider is looking for Home ...

Recruitment Genius: Web Team Leader

£30000 - £35000 per annum: Recruitment Genius: One of the UK's leading web des...

Recruitment Genius: Client Manager

£27000 - £35000 per annum: Recruitment Genius: A growing, successful, friendly...

Recruitment Genius: Property Negotiator - OTE £20,000+

£16000 - £25000 per annum: Recruitment Genius: This family owned, independent ...

Day In a Page

Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

Greece referendum

Greeks say 'No' to austerity and plunge Europe into crisis
Ten years after the 7/7 terror attacks, is Britain an altered state?

7/7 bombings anniversary

Ten years after the terror attacks, is Britain an altered state?
Beautiful evening dresses are some of the loveliest Donatella has created

Versace haute couture review

Beautiful evening dresses are some of the loveliest Donatella has ever created
No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

No hope and no jobs in Gaza

So the young risk their lives and run for it
Fashion apps: Retailers roll together shopping and social networking for mobile customers

Fashion apps

Retailers roll together shopping and social networking for mobile customers
The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate