Bankruptcies at lowest in 15 years
The Government’s latest report of Insolvency Statistics for the July-September quarter have revealed signs of a strengthening economy for individuals and companies in England and Wales, with decreases in formal insolvencies, including bankruptcies.
- 6% decrease in personal insolvencies
- 7% decrease in bankruptcies
- 9% decrease in IVAs
- 7% increase in debt relief order (DRO.)
The number of people becoming insolvent in England and Wales has fallen 4.6% to 24,837 since the same quarter of last year. This comes from a decrease in the number of bankruptcies, with the number of people going bankrupt falling 18.7% – the lowest in 15 years.
R3 President, Giles Frampton, stated:
“The recent spikes in personal insolvency numbers have been partially driven by people switching into formal processes – usually IVAs – having previously been in unrecorded debt management plans. It may be that the bulk of this ‘switch’ has now taken place.”
The figures from the Insolvency Service state 4,886 bankruptcy orders were written in the July-September quarter of 2014, noting a one-fifth drop in comparison to the same quarter of 2013.
The results suggest the decrease in formal personal insolvencies, including the decrease in bankruptcies, are in correlation with the increase in debt relief orders (DROs), an alternative form of insolvency to bankruptcy for those unable to afford and IVA or Debt Management Plan.
David Rankin, Lead Insolvency Practitioner at Harrington Brooks, comments:
“While the statistics may suggest a downward trend in personal insolvencies it must be remembered that until non-statutory debt management plans are officially recorded, it will be impossible to establish the true picture of personal insolvency in England and Wales. Research by insolvency industry body R3 shows that 44% of British adults are worried about their level of debts, while one-in-four 25-44 year olds have five or more debts to their name, so falling insolvency numbers do not necessarily mean the UK’s personal debt issue is going away.
“A rise in interest rates in 2015 may put too much pressure on some household finances while the outcome of a recently closed government ‘call for evidence could make it easier for people to access Debt Relief Orders while at the same time making it harder for creditors to make people bankrupt. In addition, the effect of regulation of Debt Management Plan providers by the FCA may also result in more consumers being placed into a formal insolvency solution.”