Personal insolvencies up by 3%

Some 6,469 bankruptcy orders were recorded in the second quarter of this year
2 August 2013

Personal insolvencies edged up from a five-year low in the second quarter of this year.

Some 25,717 individual insolvencies were recorded, showing a 3% increase on the previous three months, although this is still 6% lower than the same period last year, the Insolvency Service's report said.

The overall figure masks a decline in bankruptcies, which fell by 3% on the previous quarter and remained at their lowest levels for more than a decade.

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.

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

Create a FREE account to continue reading

eros

Registration is a free and easy way to support our journalism.

Join our community where you can: comment on stories; sign up to newsletters; enter competitions and access content on our app.

Your email address

Must be at least 6 characters, include an upper and lower case character and a number

You must be at least 18 years old to create an account

* Required fields

Already have an account? SIGN IN

By clicking Create Account you confirm that your data has been entered correctly and you have read and agree to our Terms of use , Cookie policy and Privacy policy .

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged in