Number of people going insolvent edges up

Some 26,030 people went insolvent in England and Wales in the third quarter, although this number is still seven per cent lower than the same period a year ago, according to Insolvency Service figures.

The rise was driven by a sharp increase in individual voluntary arrangements (IVAs), which are agreements with creditors to pay back all or part of the debts, usually over a period lasting around five years.

The two other types of formal personal insolvency – bankruptcies and debt relief orders (DROs) – continued to drift downwards.

The number of people being tipped into personal insolvency had reached a five-year low of just over 25,000 in the first quarter of 2013, but the figures have been edging up slightly since then and the latest total marks a 1 per cent increase on the second quarter.

Some 76,763 people have become insolvent this year so far. Despite the recent uplift in the figures, if they remain broadly the same into winter it will still mean that the overall total for this year comes in lower than the 109,000 people who went insolvent in 2012. Last year’s total was the lowest annual figure recorded since 2008.

Within the new figures, there were 13,394 IVAs recorded, marking a six per cent increase on the same period last year and the highest number seen in more than three years.

Some experts have suggested that on the face of it, the rising proportion of people opting for IVAs and trying to pay some money back rather than simply declaring themselves bankrupt is a sign that confidence in the economy is improving.

But they have also pointed out that it could be a sign that some people who have been previously juggling their debts are now finding the squeeze on their income too much to bear, which is forcing them into doing a deal with their creditors.

The number of people being declared bankrupt continued to run at its lowest levels in more than a decade in the latest figures.

Some 6,004 bankruptcies were recorded in the third quarter, which is down by one fifth (21 per cent) on a year ago and marks the lowest number since winter 2002.

Bankruptcies, which are often seen as a “last resort”, have been in general decline since the introduction of DROs in 2009, which are often dubbed “bankruptcy light”.