Personal insolvencies will fall to their lowest level since 2005, a report by RSM Tenon has predicted.
The firm estimates some 100,000 people will become insolvent as the trend of ‘modest quarterly falls’ looks set to continue.
In 2005, some 67,000 people were declared insolvent.
During this year’s first quarter about 28,000 people became insolvent – a 2% drop on the previous quarter and a 9% fall on Q1 2011.
Of those, there were 9,000 bankruptcies, 8,000 Debt Relief Orders (DROs) and 11,000 Individual Voluntary Arrangements (IVAs).
RSM Tenon’s head of personal insolvency, Mark Sands, explained: “Despite talk of a double dip recession, personal insolvencies have simply not increased overall, but this is likely to be the result of the majority of households managing their finances better and only buying required items or items in sales and resisting the urge to purchase expensive, luxury or non-essential items.”
Although the number of bankruptcies edged up compared to Q4 2011, Sands said this should not be seen as a “portent of doom”.
He explained: “The first quarter of every year typically sees increased credit card debt and defaults on payments as the impact of overspending at Christmas takes its toll.
“This combined with other factors such as rising utility and fuel costs as well as pay freezes can cause many to become bankrupt.”
DROs have also increased 25% over the last two years and – as those with debts of less than £15,00 can only apply – the report states ‘this brings home how much even modest levels of debt can leave families facing financial ruin’.
Meanwhile, the 26-55 age group represented 77% of personal insolvencies while the number of people aged 18-25 entering personal insolvency rose 12% compared to Q4 2011.