Personal Insolvencies down 11% on last year

Fewer people were declared insolvent than for the same period last year according to official figures released today from The Insolvency Service.

Related topics:  Finance News
Millie Dyson
4th November 2011
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There were 30,219 individual insolvencies in England and Wales in the third quarter of 2011.

This was a decrease of 11.0% on the same period a year ago.  This was made up of 9,567 bankruptcies, 13,048 Individual Voluntary Arrangements, and 7,604 Debt Relief Orders, (which were up 7.6% on the corresponding quarter of the previous year and represent the highest quarterly total since their introduction).

In April 2011 a change was introduced to Debt Relief Order legislation to allow those who have built up value in a pension scheme to apply for debt relief under these provisions; this will have increased the overall numbers of those eligible to apply for a Debt Relief Order, and is also expected to have had some impact on the numbers of bankruptcy orders.

In the third quarter of 2011, 79.0% of bankruptcies were made on the petition of the debtor, down from 83.0% in the previous quarter. The percentage of bankruptcy orders involving trading debts was 20.3% in the second quarter of 2011, similar to the previous quarter, but noticeably higher than three to four years ago. The falling total number of bankruptcies since 2009 is mainly due to lower numbers of consumer bankruptcy cases, which will have been more directly impacted by the introduction of DROs in April 2009.

There were 4,242 compulsory liquidations and creditors’ voluntary liquidations in total in England and Wales in the third quarter of 2011 (on a seasonally adjusted basis). This was an increase of 0.1% on the previous quarter and an increase of 6.5% on the same period a year ago.

This was made up of 1,203 compulsory liquidations (which are down 6.6% on the previous quarter and up 5.7% on the corresponding quarter of the previous year), and 3,039 creditors’ voluntary liquidations (which are up 3.1% on the previous quarter and up 6.8% on the corresponding quarter of the previous year).

Additionally, there were 1,253 other corporate insolvencies in the third quarter of 2011 comprising 374 receiverships, 673 administrations and 206 company voluntary arrangements. In total these represented an increase of 10.0% on the same period a year ago.

In the twelve months ending Q3 2011, approximately 1 in 138 active companies went into liquidation, similar to the previous quarter. As Figure 3 shows, the liquidation rate remains low compared to the peak of 2.6% in 1993, and the average of 1.2% seen over the last 25 years.  It should be noted that the number of active companies has changed considerably over this period; there were 2.3 million active registered companies in Q3 2011; this compares with only about 900,000 in the early 1990s and less than 800,000 in 1986.

In the twelve months ending Q3 2011, approximately 1 in 361 people became insolvent. This is down from 1 in 349 in the previous quarter. As Figure 3 shows, the individual insolvency rate had displayed a steeply upward path (with some fluctuations) since 2004 through to the second quarter of 2010 and is currently still elevated compared to the annual average of 1 in
1,655 people seen over the last 25 years.

Sarah Hamilton-Fairley, CEO of independent social enterprise StartHere comments:

"Overall, individual insolvencies are down compared to a year ago, but those faced with severe debt problems won't care about statistics.

"Behind every one of those personal insolvencies is a personal crisis, but it's one that can be made easier with the right support, whether that's help to slash their monthly outgoings or a debt management plan organised with creditors.

"People facing rising debt problems are too often in denial – and for far too long. As a result, their problems can rapidly snowball.

"Rather than wish their problems away, people in serious financial difficulty need to act quickly and speak to experts who can help find a solution, whether that's a debt relief order or declaring themselves bankrupt.

"Part of the problem is that people are often embarrassed to talk about their debt problems with family and friends.

"If this is the case there are plenty of local organisations and support groups that provide advice, not least the Citizens Advice Bureau or the Consumer Credit Counselling Service.

"But the important thing is that they reach out and ask for help as soon as possible.
"There's no longer such a stigma surrounding bankruptcy or personal debt problems but the experience can be traumatic."

Chris Nutting, Director of Personal Insolvency at KPMG said:

“Today’s figures show that the latest bankruptcy numbers 9567 are falling to levels last seen in 2004.  And whilst this may seem to be good news on the face of it, it fails to reflect the number of people with severe personal indebtedness. 

“There is a growing number of individuals with large amounts of unsecured debt looking for some resolution of their financial problems which have simply not gone away.

“And while creditors are willing to set up repayment plans with debtors, the continual pressure on household budgets due to the price increases of fuel, energy and food means that even agreed repayment plans will be broken.   This is likely to result in more debtors eventually turning to a formal insolvency procedure to resolve their financial problems.

“It is vital that debtors consult with their creditors at the earliest opportunity when faced with financial problems and seek proper advice as to the options available to them.”

Brian Johnson, an insolvency partner at HW Fisher & Company chartered accountants commented:

"The relatively benign company insolvency figures belie the phenomenal pressure that exists in the economy.
"The normal pressure points of insolvency, namely the banks, the Revenue, lan
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