Debt: New record high for number of insolvencies

INSOLVENCIES have risen to a new record high while the numbers of firms going into liquidation have fallen.

Around 35,682 people in England and Wales became insolvent during the first three months of the year, the fifth consecutive quarter during which the total has hit a new high, as increasing numbers of consumers struggle to keep up with their debts.

But on the corporate front, total company liquidations fell by four per cent compared with the previous quarter to 4,196, according to Insolvency Service figures.

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Within the total for individuals, 18,256 people went bankrupt, seven per cent more than in the previous three months but down on the same period of 2009 when there were a record 20,446 bankruptcies.

The number of people taking out an individual voluntary arrangement (IVA), under which interest on debt is frozen in exchange for a set amount being repaid each month, dropped by 11 per cent to 11,782.

But insolvency practitioners said this should not be seen as a positive trend, as it is likely to reflect the fact that job losses mean fewer people are able to afford regular repayments on their debts, forcing them to consider other options such as bankruptcy.

There was also a six per cent rise in debt relief orders, which offer an alternative to bankruptcy for people with debts of less than 15,000.

The number of people declared insolvent has been rising steadily since the final quarter of 2007, through a combination of the credit crunch and rising unemployment.

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