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Personal insolvencies soar to a record 135,000 4 February 2011

The latest quarterly statistics from the Insolvency Service, published today, show that 135,089 people entered either bankruptcy, an individual voluntary arrangement (IVA) or a debt relief order (DRO) in 2010, a rise of 947 people compared to 2009.

The figures show there were 30,729 individual insolvencies in England and Wales in the fourth quarter, a drop of 13.6 per cent on the same period a year ago.

This was made up of 12,049 bankruptcies (down 29 per cent on the corresponding period in 2010), 12,508 IVAs and 6,172 DROs. The figures showed a 15 per cent hike in DROs on the same period a year ago.

Bev Budsworth, managing director of debt solutions provider The Debt Advisor, said: “2010 was another record-breaking year with personal insolvencies topping 135,000 and a further 800,000 on debt management plans.

“The level of UK personal debt is over £1.4trn with the average adult owing nearly £30,000 inclusive of mortgage, or over 125 per cent of their average earnings. It’s clear then that this is still a huge issue. I believe that insolvencies could top 150,000 this year – five times the levels of a decade ago.”

Baker Tilly said the number of bankruptcies in the fourth quarter continued the reduction that began in the previous two quarter, and is now 29 per cent lower than a year ago.

Alec Pillmoor, head of personal insolvency at Baker Tilly, said: ““My concern is that the reduction in bankruptcies may be reversed during 2011 as household incomes do not keep up with price increases. Everyone has noticed the increase in their weekly shopping bill and the increased cost of travelling to work.

“These will mean that those families that have just been able to meet their costs will no longer being able to do so and will inevitably result in insolvency. With the housing market being generally depressed, being able to sell your house to reduce outgoings is not a realistic option for many.”

R3 president Steven Law said: “Worryingly, these figures do not include the number of people using informal insolvency solutions such as debt management plans, of which there are estimated to be around 700,000.”

Delroy Corinaldi, external affairs director at the Consumer Credit Counselling Service, said: “The picture is bleak, particularly in view of the pressures on advice services.

“Fee-charging debt management companies must not be allowed to plug the gap left by the reduction in public funding for debt advice. It would compound the situation if over-indebted households believed they had no alternative but to pay for debt advice.”

 

 

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