Personal insolvencies soar to record high
The Insolvency Service has today revealed the impact of the recession after the number of people being declared insolvent in England and Wales hit a record high.
According to the figures, a record 33,073 people in England and Wales were declared insolvent in the second quarter of 2009.
This represents a rise of 9% compared with the first quarter of 2009 and 27.4% more than in the same period a year ago.
Meanwhile, the number of companies going bust in England and Wales continued to decline, falling by 14% compared with the first quarter but 23% higher than in the same period last year.
1,529 other companies collapsed in the second quarter of the year, comprising 345 receiverships, 1,027 administrations and 157 company voluntary arrangements.
Mark Sands of the insolvency experts, Tenon Recovery, comments: “Overall personal insolvency levels will continue to increase throughout 2009, with a record level of 140,000 or more expected by the end of the year.”
On 6 April this year, the Debt Relief Order (DRO) was introduced – an alternative to a traditional bankruptcy proceeding. There were 1,978 DROs in April, May and June.
DROs are available to borrowers with debts worth £15,000 or less, assets of less than £300 and surplus income of less than £50 per month.
According to the Consumer Credit Counselling Service (CCCS), debt advice charity, DROs are the “best solution” for many people in debt.
Malcolm Hurlston of the CCCS explains these will eventually outstrip bankruptcies. “As a result, total bankruptcies may soar, but that will be good news rather than bad, since many more people in serious debt will have found the right solution.
“In the past, stigma and cost have put people off going bankrupt, in circumstances when it would have been best for them and neutral for their lenders,” added Mr Hurlston.