Insolvencies increase for the first time in a year as people struggle with debt
Friday 02 November 2012
Personal insolvencies have increased for the first time in a year as more people struggle with unmanageable debt, official figures showed today.
There were 28,062 individual insolvencies across England and Wales, showing a 2.5% increase on the previous quarter, although the figure is still 7.2% lower than the same period a year ago, the Insolvency Service said.
Within this, there was a big increase in the number of individual voluntary arrangements (IVAs) on the previous quarter, while bankruptcies continued to fall and are at their lowest level since 2003.
Bankruptcies are a fifth lower than they were a year ago, with 7,617 orders made. The Insolvency Service said that one of the reasons for the decline is the increasing use of debt relief orders (DROs), which were introduced three years ago and have overtaken bankruptcies for the first time in today's figures.
There were 7,777 DROs in the third quarter of this year, showing a slight decline on the previous quarter but a 2.3% rise on a year ago.
DROs are often dubbed "bankruptcy light" and are aimed at people who have more modest levels of debt but no realistic prospect of paying it off.
IVAs were the only type of personal insolvency to show an increase on the previous quarter, with a large 11.9% rise to reach 12,668. Bankruptcy numbers have been lower than IVAs for a year and a half.
IVAs are agreements between people and their creditors that they should pay their debts to a specialist, who then shares the money out between creditors as agreed.
Joanna Elson, chief executive of charity the Money Advice Trust, said: "Our experience tells us that the falling bankruptcy figures are not a result of improved household finances, but rather of the increased cost of going bankrupt.
"People struggling with debt often simply can't afford the £700 it costs to go bankrupt, even though that would otherwise be their best option.
"This leaves them in a financial black hole."
The country recently saw an end to the longest double-dip recession since 1950, but experts have warned that insolvency figures often come to a peak after a recession has finished, due to the time-lag as people try to struggle on.
Household finances are set to come under renewed pressure this winter, with a string of major energy companies announcing price hikes in recent weeks and food and some mortgage costs on the rise.
Ms Elson warned that the figures are likely to worsen in the coming months.
She said: "The hard reality remains that it takes up more and more of our income to put food on the table, travel to work, and heat our homes.
"This means many households are running a budget deficit of their very own, and some are relying on credit to bridge the gap."
- 1 Michael Douglas regrets 'embarrassing' Catherine Zeta-Jones with oral sex comments
- 2 Tunisia hotel attack: Locals form 'human shield' to protect hotel from gunman Seifeddine Rezgui
- 3 Tunisian builder has been hailed a hero after knocking gunman to the ground with roof tiles
- 4 German ethics council calls for incest between siblings to be legalised by Government
- 5 Fifty Shades of Grey author E.L James's Twitter Q&A didn't go exactly as planned
Michael Douglas regrets 'embarrassing' Catherine Zeta-Jones with oral sex comments
Kim Jong-un shows off airport designed by architect he likely had executed
Tunisia hotel attack: Locals form 'human shield' to protect hotel from gunman Seifeddine Rezgui
Ex-Scientologist Carmen Llwyelyn blasts 'cult' and her treatment after divorce with Jason Lee
Tunisian builder has been hailed a hero after knocking gunman to the ground with roof tiles
The moment a Queen's Guard soldier lost it and drew his gun at annoying tourist
Greece crisis: The wider lesson is that it’s time to abandon this failed experiment in currencies
'I wish the BBC would stop calling it Islamic State' – David Cameron unleashes frustration at broadcaster
Extend Right To Buy to tenants of private landlords, Labour's Jeremy Corbyn says
David Cameron struck double blow in his hopes to win Britain a new EU deal
Pentagon accuses Russia of 'playing with fire' over nuclear threats towards Nato
£15000 per annum: Recruitment Genius: One of the largest hospitality companies...
£28000 - £32000 per annum: Recruitment Genius: As a result of significant cont...
£16575 - £19000 per annum: Recruitment Genius: An excellent opportunity is ava...
£30000 - £35000 per annum: Recruitment Genius: This leading and innovative con...