Some families’ finances have been hit by rising prices Fall in personal insolvency total
Some families’ finances have been hit by rising prices Fewer people were declared insolvent in England and Wales in the first three months of the year, although experts predict a rise later in the year.
There were 30,162 personal insolvencies in the first quarter, down 1.7% on the previous three months and the fourth consecutive quarterly fall.
The Insolvency Service figures show the number was 15.5% down on the same period a year earlier.
However, there was a rise in the number of businesses going bust.
A record number of people were declared insolvent in 2010, but the numbers were falling as the year went on.
Some people find that Christmas spending adds to debt problems, with credit card bills landing at the start of the year, but the trend of falling personal insolvencies continued at the start of 2011.
A variety of options are available for those facing acute financial difficulties.
There has been a sharp fall in the number of people choosing the traditional route of bankruptcy. There were 12,539 bankruptcies in the first three months of the year, down 31.3% on the same period a year earlier, although the total was up 4% from 12,028 in the last quarter of 2010.
Forms of insolvencyBankruptcy: The traditional way of escaping overwhelming debt. Ends after one year, but you are likely to lose all your assets including your house to pay something to the creditorsIndividual voluntary arrangement (IVA): A deal between you and your creditors, overseen by an insolvency practitioner. Less stigma, less chance of losing your home, but involves paying some of your debts in one go or over a number of yearsDebt Relief Orders: Introduced in April 2009, these allow consumers with debts of less than £15,000 and minimal assets or surplus income to write off debts without a full-blown bankruptcyWhat to expect if you go bankrupt
The number of people choosing an Individual Voluntary Arrangement (IVA), which allows an official deal to be struck between the debtor and creditors, also fell compared with a year ago.
There were 10,835 IVAs declared, which was 8% lower than the first quarter of 2010.
However, the new style of insolvency for those with relatively low debts – known as a Debt Relief Order – grew in number to 6,788. This was 20.3% higher than the same quarter of last year and was up 10% on the previous three months.
Frances Coulson, president of R3 – the insolvency professionals trade body – welcomed the fall in personal insolvencies, which are now at their lowest level since the last three months of 2008.
“Our research shows that, against the backdrop of increased living costs and falling income, four in five consumers have changed how they shop in a bid to save money. A further drop in personal insolvency may signal that the reining in of domestic belts is starting to pay off,” he said.
“However, this data only captures those that are in formal insolvency procedures so we are unable to gauge how many households are struggling.”
“I felt ashamed. Who was I to have all my debts written off when there are other people who work hard to pay them off?”
Kathryn Bevan, who was declared bankrupt a year ago‘I was facing a lifetime of debt’
Separate figures released in April showed that personal insolvencies also fell in Scotland.
The Accountant in Bankruptcy (AiB) figures showed 4,262 people were declared insolvent between January and March – a drop of 7% on the previous three months.
However, accountants are predicting a rise in personal insolvencies across the UK later in the year, with job losses expected to increase and austerity measures continuing to take effect.
“These figures must not mask the fact that the crippling effects of personal debt are still very much being felt by households,” said Louise Brittain of Deloitte.
“The recent decision by the Bank of England to keep the Bank rate at 0.5% would have brought a sigh of relief to debt-riddled households. This is helping thousands of cash-strapped homeowners avoid personal insolvency.
“However, the economy as a whole still remains fragile with households feeling the squeeze from high inflation, tax rises and the prospect of job losses, we cannot count on this positive trend continuing as the year goes on.”
There was more concerning news for businesses in England and Wales.
There were 1,314 receiverships, administrations or company voluntary arrangements in the first three months of the year.
All three showed a rise compared with the previous three months, although the total was down 2.2% on the same period a year ago.
There were 4,121 firms that were liquidated – the end point of the insolvency process – in the first quarter of 2011. This was 3.7% higher than the previous quarter and up 2.1% on the same period a year ago.
In Scotland, there were 279 company liquidations in the first three months of 2011, up from 245 during the previous three months and 275 in the first quarter of 2010.
In Northern Ireland, there were 94 company liquidations in the first three months of the 2011, up from 85 during the previous three months, but down from 102 in the first quarter of 2010.
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