Personal Insolvencies Hit a Record High

Personal insolvencies across England and Wales recently hit their highest number since records began in 1960. The Insolvency Service statistics for the third quarter of 2009 indicate that 35242 people were declared insolvent, which is a massive 28% increase on the same period of 2008. The 35242 insolvencies were made up of 18340 bankruptcies, 12390 Individual Voluntary Arrangements (IVAs) and 4505 Debt Relief Orders (DROs).

The Debt Relief Order is a relatively new alternative to bankruptcy for those with debts amounting to less than £15000 and assets with a total value of £300 or less. It was introduced in April 2009.

What these statistics do not take into account, however, is the number of debt-ridden consumers embarking upon debt management plans. Given the informal nature of debt management plans, they do not officially count as insolvencies and there is no central register of figures kept, though an estimated 100000 are agreed each year.

Although not unexpected, the sharp rise is a cause for concern in a period in which unemployment continues to rise. Consequently, the fourth quarter of 2009 is forecasted to see a further increase on these figures, despite the fact that the recession is forecasted to formally end throughout the final three months of the year. However, experts warn that unemployment is likely to continue to rise for some time. As rising unemployment is thought to largely account for the rise in personal insolvencies, it is seen by many to be almost inevitable that the statistics will worsen as the year comes to a close.