With alternative methods to dealing with debt problems such as Debt Relief Orders (introduced in 2009), the number of bankruptcies has slumped to its lowest number in more than 10 years with 6,469 bankruptcy orders made in the second quarter of this year which is down from 8,093 a year ago.
Debt Relieft Orders (DROs) are now an effective alternative to Bankruptcy for those with debts less than £15,000 and a disposable income under £50. A DRO can be applied for via an intermediary and can cost just £90.
The latest figures from the Insolvency Service show that the number of DROs has now begun to outnumber the number of bankruptcies for the past year. There were 27,705 Bankruptcies made in the last year, which compares to 29,677 DROs made in the same period.
Insolvencies were nearly double the number of bankruptcies for the second quarter in 2013 with 12,116 being made compared to just 6,469 bankruptcies made in the second quarter of 2013.
This goes to show that people are looking for alternative debt solutions to declaring bankruptcy and are perhaps seeing other options as a preferable way to solve their debt problems.
With the cost of living growing quicker than household incomes, personal debt seems certain to rise, though the average level of debt per person is looking like it is falling with the tightening of lending criteria since the credit crunch.
This would certainly explain why people might be looking at alternative solutions such as IVAs and DROs rather than bankruptcy.
Andy Gorton, director at the Bankruptcy Clinic, said the figures from the Insolvency Service ‘still mask the number of people who aren’t coping financially with an estimated half of UK adults struggling to keep up with bills and debt repayments’