Analysis of personal insolvency statistics by RSM Tenon Tracker, the real-time insolvency monitor, found that around 33,700 people entered personal insolvency during the third quarter of the year.
This represents a fall of 3% compared to the previous three months, but is still far in excess of pre-credit crunch totals.
Key statistics:
- Around 366 people a day entered insolvency during the third quarter of 2010
- This is the sixth consecutive quarter that has seen personal insolvency levels in excess of 33,000
- Just over 13,600 people were declared bankrupt during the last quarter – the lowest level since the end of 2005
- A record 6,900 people entered a Debt Relief Order (DRO) in the last three months, up 10% on the record levels of Q2 2010
- More that 13,100 people entered an Individual Voluntary Agreement (IVA), almost on a par with last quarter’s record total
Mark Sands , Head of Bankruptcy at RSM Tenon, comments on personal insolvency levels:
Personal insolvency levels fell by 3% compared to the previous three months, the lowest quarterly total since Q2 2009
“Personal insolvency levels have remained broadly consistent over the last eighteen months. We fully expect to see inflated annual insolvency levels last until the Olympics.
“If anything, people will face even greater difficulties in the coming months with public sector cutbacks likely to leave many people facing a period of unemployment and reduced wages. These new challenges will be a step too far for a significant number of people that have continued to struggle with debts that have been built up over several years.”
Bankruptcies fell to 2005 levels, down 9% on the previous quarter
“With other options available, people have come to see bankruptcy as the last resort and are increasingly willing to consider other options to address their financial difficulties. As such, the dramatic fall in the number of bankruptcies actually has little bearing on overall personal insolvency totals.”
The popularity of Debt Relief Orders continued to increase, up 8% on the previous quarter
“With DROs being the cheap and cheerful option for people looking to resolve their financial difficulties, it is not surprising that people are using this method to write off their debts. DROs cost less than a sixth of the £600 needed to go bankrupt and do not require a court appearance or an interview with the Official Receiver.
"The continued increase in DROs also suggests that people are being more proactive in addressing their troubles before they spiral out of control and require more extreme solutions.”
IVAs see a slight (2%) drop from last quarter’s record levels
“The continued popularity of IVAs will largely be defined by the impact that public sector cuts will have on employment levels. IVAs require a commitment to a payment plan, usually over five years, and are therefore dependant on people having a regular income.
"A dramatic increase in unemployment could therefore force people to turn to other solutions, such as bankruptcy, to address their financial difficulties."
