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Personal insolvencies hit new high

Individual insolvencies up 24.9% year-on-year
using a computer

Decide which debt is the most expensive, and pay this off first

A record-breaking number of people were declared insolvent in England and Wales during 2009, with 35,574 of them entering into insolvency in the final quarter of the year.

While statistics now show that the UK emerged from recession during the final three months of the year, the number of people who went bankrupt, took out an Individual Voluntary Arrangement (IVA) or applied for a Debt Relief Order (DRO) was up 24.9% on the same period in 2008.

According to the Office for National Statistics, there were 17,007 bankruptcies, 13,219 IVAs and 5,348 DROs entered into during the last quarter of 2009.

Throughout the whole of last year, 134,142 people were declared insolvent in England and Wales. The previous record for personal insolvencies was 107,288 in 2006.

Bankruptcies down, IVAs up

Overall, the number of people going bankrupt in the last three months of 2009 was down 5.5% year-on-year. Meanwhile, the number of people opting for IVAs increased by 26.3% compared with the same period in 2008.

IVAs are perceived as carrying less ‘stigma’ than bankruptcy, and are sometimes used by individuals who would lose their jobs or be unable to continue in their careers if they became bankrupt. However, they can be expensive to arrange and administer, and are not suitable for all people in debt.

DROs, introduced in April 2009, allow individuals with minimal assets and debts of less than £15,000 to write off what they owe without declaring themselves bankrupt. Awareness of DROs seems to be growing, and some experts predict an increasing number of consumers will petition for them in 2010.

Get debt help

Which? debt expert Martyn Saville said: ‘These latest statistics show just how serious the effects of the financial crisis have been on consumers. Many people have been pushed into difficulty with debts, and although the recession is officially over lots of families will continue to feel the effects of the downturn in 2010.

‘If debts are playing on your mind or slowly sliding beyond your control, make sure you deal with your worries immediately. Seeking help now could prevent you from needing to take drastic steps – such as declaring yourself insolvent – at a later date.’

The free online resources available from Which? could be great help if you’re struggling to stay on top of debts. Our free How to deal with debt guide 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.

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