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Large Increase in Personal Insolvencies

The second quarter of 2009 saw a 27% increase in personal insolvencies from the same period of the previous year. That is 33,073 personal insolvencies.

The new figures, published by the Insolvency Service, show that out of the 33,073 personal insolvencies, 18,870 were bankruptcies (an increase of 15.3%,) individual voluntary arrangements (IVAs) accounted for 12,225 with an increase percentage of 27.4% and, finally, Debt Relief Orders (DROs) which accounted for the remaining 1,978.

Interestingly, 86% of the bankruptcies were made on the petition of the debtor which was a similar figure compared to the previous quarter and only lightly higher than the corresponding dates in 2007 and 2008. The percentage of bankruptcy orders involving trading debts (self employed bankruptcies) was 13.7 per cent in the first three months of 2009. Figures aren’t currently available for the second quarter but the first quarter figure was up slightly from 12.9 per cent in the previous quarter.

Broken down further, the above figures also reveal that 1,529 of the personal insolvencies were in fact corporate insolvencies, a rise of 22.7%.

Current trustee of charity “The Debt Advice Foundation” and former Chief Exec of Debt Free Direct, Andrew Redmond, said “as the recession continues to bite we anticipate that personal insolvencies will continue to rise, putting additional strain on debt advice resources. Citizens Advice Bureau is reporting over 7,000 debt enquiries every working day. Indeed the growing number of people struggling to cope with their debts has led us to create a dedicated Debt Advice Foundation helpline which will launch on Monday to provide immediate advice and assistance to UK consumers. Looking at the figures it is clear that the banks have relaxed their approach towards accepting IVAs; with IVAs up 27 per cent compared with bankruptcies at only 15 per cent. These figures do not reflect the much higher number of insolvent consumers entering unregulated Debt Management Plans – as yet the numbers of which are not included in official statistics.”

A spokesman for the Association of British Insurers said “the latest insolvency figures are alarming. They are particularly bad news for suppliers who are unsecured creditors, as it’s likely they will herald an increasing number of pre-packaged administrations, in a year which has already seen a record number.”

Of course, first glances do not always give a true account of the situation with many people now trying to declare themselves bankrupt or insolvent as they attempt to avoid paying back the massive amounts of debt being racked up when debt collection agents come calling.

In a society where “buy now, don’t pay later” is dominant and living beyond your means seems to be the norm, they have both certainly helped these figures to rise with the refusal of a large amount of individuals to take responsibility for their debt and actively seek to repay them. When they refuse and those owed money turn to debt recovery companies to help collect back the outstanding debt, some debtors even ask to be made bankrupt, rather than have to face paying their bill.