The UK remains on track to see a record 140,000 personal insolvencies this year, according to analysis of personal insolvency statistics by RSM Tenon Tracker.
RSM said there were 3,700 people entering personal insolvency during the third quarter of the year – equivalent to around 366 people a day becoming insolvent during July, August and September.
Mark Sands, head of bankruptcy at RSM Tenon, the UK’s seventh largest accountancy firm, warned that public sector spending cuts and a risk of higher unemployment will be a “step too far” for a significant number of people struggling with debts.
However, despite this the numbers of bankruptcy fell to just oveer 13,600 during the last quarter – the lowest level since the end of 2005.
Sands said: “With other options available, people have come to see bankruptcy as the last resort and are increasingly willing to consider other options to address their financial difficulties. As such, the dramatic fall in the number of bankruptcies actually has little bearing on overall personal insolvency totals.”
As a result debtors are seeking other debt solutions. A record 6,900 people entered a Debt Relief Order (DRO) in the last three months, up 10 per cent on the record levels of second quarter 2010. And more that 13,100 people entered an Individual Voluntary Agreement (IVA), almost on a par with last quarter’s record total.
Sands said: “With DROs being the cheap and cheerful option for people looking to resolve their financial difficulties, it is not surprising that people are using this method to write off their debts. DROs cost less than a sixth of the £600 needed to go bankrupt and do not require a court appearance or an interview with the Official Receiver.
The continued increase in DROs also suggests that people are being more proactive in addressing their troubles before they spiral out of control and require more extreme solutions.”