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Insolvency figures reach record highs in 2010′s first quarter

Written by on 11 May, 2010

A total of 35,682 people in England and Wales became insolvent in the first quarter of 2010, the latest report from the Insolvency Service has revealed. The figure is a new high, showing that in the first three months of this year the equivalent of 566 people a day entered into insolvency. The total is the highest level since records began in 1960.

These results conclude the fifth quarter in a row in which the figures have reached their highest, as individuals slowly lose the battle with keeping on top of their debts amid the credit crisis. The worrying numbers show that personal insolvencies are up by 17.9% compared to the same period of 2009.

However, corporate figures proved to be more encouraging, with a total of 4,082 company liquidations and creditors’ voluntary liquidations during the first quarter. This was a decrease of 8.4% on the previous quarter and an impressive 17.8% decrease on the first quarter of last year.

The newest statistics on personal insolvencies found there were 18,256 bankruptcies on total – which is in fact down by 10.7% from the same quarter of last year, but still an increase of 7% on the previous quarter. There were 11,782 Individual Voluntary arrangements (IVAs), an increase of 20.1% on the corresponding quarter of 2009. An IVA is an arrangement with those that are owed the money to write off a portion of the debt, while bankruptcy takes the form of a court order where assets are sold to repay creditors.

The remainder of insolvencies were in the form of 5,644 Debt Relief Orders (DROs). These new routes into personal insolvency were introduced in April 2009 to allow customers with debts of less than £15,000 and few assets to their name to write off their borrowing without having to be declared completely bankrupt; the number of DROs has risen 6% from the 5,348 of the final quarter of last year.

There are also concerns regarding the age groups turning to Debt Relief Orders to save finances; a growing number of over-70s have applied and have the highest average debt balance of all the age groups, owing around £9,100. Research has also shown that individuals as young as 19 are applying for the system to ease financial worries, suggesting how widespread debt now is and confirming the struggles currently faced by young graduates.

In the year ending March 2010, roughly one in 120 active companies went into liquidation, a small decrease from the previous quarter when the figure was one in 114. Company insolvencies were down to 1,314 compulsory liquidations, a decrease of 1.3% on the previous quarter, and down 14.8% on the first quarter of 2009. In addition there were 2,768 creditors’ voluntary liquidations, down 11.4% on the final quarter of 2009 and down 19.1% on the same quarter of the previous year.

On top of these figures there were also 1,343 other corporate insolvencies in this quarter; 356 receiverships, 204 company voluntary arrangements and 783 administrations. On a more positive note, the number of companies going into administration is down 40% year-on-year.

The higher figures have come as no surprise after predictions last year that the rise was set to continue. In the year of 2009 134,142 individuals entered into insolvency in total, and with people still living beyond their means and not managing their debt, it is likely to continue on an upward scale. New worries face those in debt this year as the new government may increase tax and cut public spending; experts predict that now that the general election is over there is likely to be a continued rise in bankruptcy.

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