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Insolvency at its lowest in England and Wales since 2003 according to official figures

Date: (6 August 2012)    |    

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England and Wales has seen the lowest level of Bankruptcy with number of people who declared themselves bankrupt showing at its lowest since 2003. In the past year it had shown a drop of 27% as individuals with smaller debts opting for lower-cost debt relief orders, according to official figures.
Overall, insolvencies have dropped to a four-year low. There were 27,390 personal insolvencies in England and Wales in the second quarter of 2012, a decrease of 10.2% on the same period a year ago.
Individuals could go insolvent in three ways the traditional bankruptcy route, by using a debt relief order (DRO), or through an individual voluntary arrangement (IVA).
The latest figures have shown that bankruptcies have dropped significantly (by 27%) in the last year. However, the number of people taking out DROs had risen by 10%. DROs were introduced in April 2009 as a lower-cost alternative to bankruptcy. Those debtors with less than £15,000 and on low income are eligible for a DRO.
Joanna Elson, chief executive of the Money Advice Trust, said that the ongoing decline in insolvency could have been driven largely due to the increase in the fees required to claim bankruptcy.
People struggling with debt often simply were not able to afford the £700 costs to declare themselves bankrupt (£525 for the deposit plus £175 for the court fee), even though that would otherwise be their best option leaving them in a financial black hole. The number of people using debt relief orders, one of the cheaper remedies, has risen again.
The number of IVAs, a formal arrangement between a debtor and their creditors that allows the debtor to pay back their debts over a fixed period, has also fallen, by 7% year-on-year. However, there were still more people with IVAs than with bankruptcies or DROs.
The overall drop in insolvencies brings the figure to its lowest since second quarter of 2008, when there were 25,966 insolvencies. The number of personal insolvencies then rose for the next two years, peaking in early 2010 at 35,682. They have fallen ever since.
Debt charity the Consumer Credit Counseling Service (CCCS) said that while the overall number of insolvencies had fallen again, the figure remained high.
Delroy Corinaldi external affairs director of CCCS said that insolvency was a very difficult thing to have to face and it came only after a long struggle to deal with debt.
He added that the fact that almost 30,000 people had to do this during April, May and June this year was staggering, and highlights just how many households were in need of help with their debt problems.