The number of consumers in England and Wales that were declared insolvent has fallen slightly for the first time since 2007 as consumers battle through over indulgence of consumer debt.
Figures from the Insolvency Service reveal that there were 34,743 individual insolvencies in England and Wales in the second quarter of 2010. This was an increase of 5.0% on the same period a year ago.
This was made up of 14,982 bankruptcies (which were down 20.6% on the corresponding quarter of the previous year), 13,466 Individual Voluntary Arrangements (IVAs), (which were up 10.2% on the corresponding quarter of the previous year) and 6,295 Debt Relief Orders (DROs)
Insolvency involves an individual either going or having been made bankrupt, or successfully proposing an Individual Voluntary Arrangement (IVA), which is seen as a less stringent form of insolvency.
An IVA allows a borrower to enter into a repayment programme, usually for 5 years with interest and charges frozen and with the remaining debt written off upon completion of the arrangement, unlike a debt plan, where you pay back the debts in full and interest and charges can still be added.
The total insolvencies for 2009 were 134,142 which is a massive increase of 26% or 27,598 on the year before.
So what of 2010? This year is on target for 140,000 which would then make it the highest since records began back in 1960. See records.
Also included in the figures are Debt Relief Orders, (DROs), which were introduced by the Government in April 2009. A DRO is designed to allow those with debts of less than £15,000 and minimal assets to write off their debts without entering into a full blown bankruptcy or having to go to Court. But it is still bankruptcy.
These are proving to only help a selected few and are totally ineffective in helping many consumers because of the ridiculous and unreasonable qualifying procedure; still they work for some as 23,770 have been issued since their inception.
DebtWizard comment
The government's budget cuts will start to hit home with consumers in the second part of this year and well into the next.
Some people have not addressed their debt situation instead relying on credit cards to pay mortgages and bills and not forgetting the historic low interest rate which is helping many pay their mortgages.
If the government increase interest rates to fight inflation then this will only fuel the figures further. I haven't even gone into rising unemployment either.
We are a long way from being confident that consumers are getting back in control with their finances.
You can read further comment on about supporting the bankrupt instead of ostracising them in my blog;
Isn't it about time we started supporting the bankrupt?
BBC Essex
Mike was live in the studio and offers one reason why he feels the bankruptcy figures are down 20%, debt advisers steering consumers prime for bankruptcy to other arrangements such as IVAs and debt plans. He also staggers Dave Monk when he reveals what the fees are for advising bankruptcy compared to an IVA, which by the way, numbers are up 10%.
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