Personal insolvencies reach record high Figures show insolvencies up 28% this year

06 November 2009

Managing finances

The number of people becoming insolvent in England and Wales rose to a record high in the third quarter of this year, as 35,242 individuals declared themselves unable to repay their debts between July and September.

According to the Insolvency Service, total insolvencies were up 28.2% on the same period in 2008. This figure takes account of bankruptcies, Individual Voluntary Arrangements (IVAs) and Debt Relief Orders.

Bankruptcies totalled 18,347 in the three months to 30 September – up 6.4% year-on-year. Meanwhile, the number of people entering IVAs reached 12,390. This was up 20.9% on the same quarter in 2008, despite recent suggestions that as many as 20% of people who opt for IVAs are unable to stick to their repayments and may therefore be forced into bankruptcy.

Debt relief orders

In addition, 4,505 people took out Debt Relief Orders (DROs) during the third quarter of this year – a new insolvency option that was only introduced in April 2009.

DROs allow consumers with minimal assets and debts totalling less than £15,000 to write off their borrowing without declaring themselves bankrupt.

The number of individuals seeking DROs between July and September was more than double that seen during the first quarter they were available, which may suggest awareness of them is growing.

The Insolvency Service said some of those who have had a DRO approved in 2009 would have had to go bankrupt under previous insolvency rules, though it was unable to state exactly how many consumers this may apply to.

Get debt help

While the number of company insolvencies for the third quarter of 2009 was down 4.7% on the previous quarter, it was still up 14.6% on the same period a year ago. Economists predict that both company and personal insolvencies will continue rising into 2010, as the grip of the recession on both individuals and businesses remains tight.

Which? Money editor James Daley said: ‘The latest figures from the Insolvency Service illustrate the devastating effects of the financial crisis and the credit crunch. The disappearance of easily available credit, not to mention job losses, will have pushed many people into debt crisis this year.

‘If you’re concerned about being in debt, the crucial thing is to address your worries sooner rather than later. By facing up to potential problems, you could prevent them from spiralling out of control at a later stage.’

The free online resources available from Which? could be great help if you’re struggling with debts. Check out our free How to deal with debt guide, which contains debt warning signs you should watch out for, independent advice on what to do if you’re in trouble, plus a list of useful contacts. Meanwhile, don’t forget that cutting your everyday costs could help you balance your budget. The Which? guide to cutting your household bills could help you get on top of debts faster by freeing up extra cash each month.

pound coins

Which? Money when you need it

You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.

Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.

Or for money-saving tips, and news of how what's going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast

For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.