The number of individual insolvencies increased nearly three percent in the third quarter to more than 19,000, according to the latest official figures.
The Insolvency Service’s latest stats show that 19,683 people became insolvent between July and September – a 2.8 percent rise on the previous three months but a decrease of 18.5 percent compared to the same period in 2014.
The services said the uptick was driven by an increase in individual voluntary arrangements (IVAs). These increased more than nine percent on the previous quarter to 10,197, but they were still 18 percent lower than a year ago.
Meanwhile the number of bankruptcies was at the lowest level since 1990. There were a total of 3,857 bankruptcy orders in Q3 2015, a 3.3 percent fall on the second quarter and than Q2 2015 and 21.4 percent lower than the same three months in 2014.
The number of bankruptcy orders has been on a decreasing trend since 2009. The introduction of debt relief orders (DROs) in 2009 is likely to have affected the number of bankruptcies. There were 5,629 DROs, a 3.5 percent decrease compared to the second quarter.
Mike O’Connor, chief executive of StepChange Debt Charity, said: “It is good to see bankruptcy and debt relief orders reducing, but the fact that overall insolvency levels are rising is a reminder that personal debt remains a persistent problem.
“A rise in IVAs is more likely to be due to volatility in the market as firms respond to Financial Conduct Authority (FCA) regulation, rather than any deeper structural change in the nature of debt problems in the UK.”
“It is also important to remember that insolvency figures don’t reflect the full extent of problem debt. More than 600,000 people contacted us for debt advice last year and insolvency was the right option for just 20 percent of them.”
He added: “We need to focus on the root causes and solutions related to debt, not just the figures. We know from our research that 14m people suffered an income shock last year and nearly half of them used credit to cope.
“Better protections from temporary financial difficulty would help people get back on their feet quickly and prevent them from falling into problem debt.”
By Marcel LeGouais