New figures released by the Insolvency Service show that the number of people becoming insolvent in England and Wales has fallen to its lowest level since 2005. Last year saw the number of personal insolvencies fall by 2% on 2013 levels to 99,200 – the fourth annual drop in a row. Corporate insolvencies have also fallen by 24%, to just 1,790.
Personal bankruptcy in particular has seen a sharp fall, with just 20,300 people declaring themselves bankrupt in 2014. This is the lowest number since 1998 and a far cry from the 2009 spike of 75,000 bankruptcies. A further decline is expected in 2015 when a new £5,000 minimum debt threshold for declaring bankruptcy is introduced later in the year, replacing the existing £750 level which has stayed the same since 1986.
Of the total number of 99,200 personal insolvencies, more than half took the form of Individual Voluntary Arrangements (IVAs), whilst the remainder were Debt Relief Orders (DROs). Whilst bankruptcy levels are declining, IVAs have become more popular in recent years, with 2014 seeing this form of insolvency reach record levels. The number of DROs is also expected to rise this year, thanks to a new maximum debt level of £20,000, which marks a £5,000 increase on the previous cut-off point.
According to financial experts, the overall drop in personal insolvencies could be a sign of economic recovery, as more people have disposable income with which to repay at least some of their debts, rather than writing them off through bankruptcy or a DRO.
However, Andy Gorton, Managing Director of debt counselling service, Bankruptcy Clinic, warns: ‘It’s encouraging that personal insolvency levels are continuing to fall. However, these figures don’t cover informal ways of dealing with debt, such as a Debt Management Plan, so they don’t tell the full story. People across England and Wales are still struggling to meet basic living costs as well as stay on top of their unsecured debts – and with interest rate increases looming in the near future, we could be on the brink of a national debt crisis.’
Despite the forthcoming rise in the base rate, unsecured lending figures are still growing, increasing the risk to vulnerable consumers who are taking on more debt. The latest statistics from the Money Charity show an average increase in outstanding consumer credit lending of £395 per household over the last year. Add mortgages into the equation and the amount owed by British households totalled a staggering £1.466 trillion in December 2014 – up from £1.438 trillion at the end of December 2013 and equating to £572 per adult.
The Money Charity’s figures also put the recent discussions about economic recovery into context. Things might be rosier on the whole, but not for the 1,132 people who were made redundant every day between September and November 2014, or the 106 people a day who had their homes repossessed after falling behind with their mortgage payments. ‘In terms of overcoming the recession, we’re not out of the woods by any means,’ says Andy. ‘And all the evidence points towards more people needing debt help in the future, rather than fewer.’
Drowning in debt? Bankruptcy Clinic is here to help
If you’re finding it hard to stay on top of your debts, it’s best to seek help as soon as possible before the problem gets any worse. The expert team at Bankruptcy Clinic are here to offer information, advice and support. We work with leading debt management firms in England, Scotland and Wales to offer a wide range of debt solutions.
The right option for you depends on your individual needs and financial circumstances. As our name suggests, we’re specialists in offering bankruptcy advice if this is the best way forward. If another option is more suitable for you, we can also arrange access to an Individual Voluntary Arrangement or Debt Relief Order. Or a Debt Management Plan might be a good choice if you have disposable income and want to keep things informal.
The sooner you contact us, the sooner you’ll find out which options are open to you so you can make an informed decision. There’s nothing to lose by asking our advice, so get in touch today.
Contact Bankruptcy Clinic
Call us free from a landline on 0808 168 7389 or on 01625 462 770 from a mobile. Or, complete our online form with your details to find out if you qualify for help with your debts.