Insolvency figures expected to rise

Insolvency figures expected to rise

The number of low income households declaring themselves bankrupt is expected to push the number of personal insolvencies to more than 30,000 again, when figures for the third quarter of the year are released later today.

In the three months to the end of June there were 33,073 individual insolvencies in England and Wales. About 19,000 of these were bankruptcies and more than 12,000 were people entering individual voluntary arrangements (IVAs), a relatively expensive form of repayment plan.

A further 2,000 people took out a debt relief order (DRO), a cheaper form of bankruptcy for people on low incomes introduced in April. These allow those with debts of less than £15,000 and assets of less than £300 to declare themselves bankrupt for a fee of £90, rather than the usual £510.

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While insolvency experts expect the number of bankruptcies to be broadly the same as the previous quarter, they predict that the number of DROs will have increased significantly.

Alec Pillmoor, head of personal insolvency at accountancy firm Baker Tilly, said: "We are expecting the number of DROs to have drastically risen to around 4,000. As people learn more about them, they see them as an increasingly viable alternative to bankruptcy to help them sort out their financial problems.

"Add to this an expected rise of 10% in IVAs then you begin to see that the recession isn't keen to relax its grip over our purse strings."

Louise Brittain, partner in Deloitte's Contentious Insolvency Group, said she also expected the orders to boost the total figure of insolvencies to more than 30,000 again.

"This figure is staggering, and unfortunately the end is not in sight," she said. "I fully expect that by the year end, 2009 will have broken all personal insolvency records with the total number of petitions likely to exceed the 130,000 mark."

The number of failed IVAs is also expected to fuel bankruptcy numbers in the new year, with as many as one in five debt repayment plans falling by the wayside, according to debt charities.

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