Personal insolvency - annual grow of over 25%

February 2010

As predicted, there is likely to be a long tail to the recession with personal insolvencies continuing to rise despite the UK technically being out of recession.

The latest quarterly statistics from The Insolvency service has shown that there were 134,142 individual insolvencies in England and Wales in 2009, an increase of 25.9% from 2008. Figures in Scotland also indicate that the number of Protected Trust Deeds (the equivalent of an IVA ), rose by over 26% in the final quarter of 2009 compared to the same quarter in 2008.

Kevin Still of debt solution specialist EuroDebt , commented; "When we reviewed the last quarterly statistics we said that if unemployment continues to rise and consumer's disposable income continues to be squeezed then we would expect the number of IVAs, Bankruptcies and Debt Management Plans (DMPs) to continue to rise into 2010.

"Interest rates have stayed at record low levels for a year and this has helped many to clear debt if they have disposable income, but we are also seeing a rise in the use of credit card debt , indicating that those without spare cash are having to resort to further borrowing. We have also seen some disturbing cases of people funding their mortgage payments with credit cards, which is a recipe for a debt spiral ."

There were 35,574 individual insolvencies in England and Wales in the fourth quarter of 2009. This was an increase of 24.9% on the same period a year ago, showing no slow down in the upward trend. This included 13,219 Individual Voluntary Arrangements (IVAs). There were 5,348 Debt Relief Orders (DROs), which were only introduced in April 2009.

Kevin Still concluded; "The demand for debt advice is exceeding capacity from government funded agencies, especially those requiring face-to-face meetings, which is what you would expect for someone facing insolvency. EuroDebt has increased significantly the number of local debt advisors to cope with demand, where indebted consumers want to see someone quickly and in their own home, where there is confidentiality and access to important documentation, like credit agreements, bills, lender correspondence and pay slips. Offering all-round debt advice and a full range of debt solutions is very important."

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