Insolvency figures set to fall
Filed under: News
The Insolvency Service is set to publish its report for the second quarter of this year, after the one for the first quarter showed the number of people declared bankrupt had risen for the first time in a year.
The overall number of personal insolvencies in England and Wales declined by 1.2% to 28,723 in the first three months of this year compared with the previous quarter, due to a sharp drop in individual voluntary arrangements (IVAs).
Charles Turner, vice-president of the Insolvency Practitioners Association (IPA), said overall insolvencies are likely to have dropped further to around 27,500 in the second quarter of this year.
IVAs are agreements between people and their creditors that they should pay their debts to an authorised debt specialist who then shares the money out between creditors as agreed.
Mr Turner said the official figures are the tip of the iceberg as they do not take into account schemes such as debt management plans which "undoubtedly account for a large proportion of unmanageable consumer debt in this country".
He continued: "With the general economic backdrop remaining gloomy it is hard to see light at the end of the tunnel for many individuals facing a continuing squeeze on their income as well as rising cost of living. I would also expect to see more small businesses to be encountering difficulties, especially those in the leisure sector and of course those in the retail sector who continue to face difficulties as well."
Personal insolvency rates have been on the rise generally since 2004 and the uncertain economy and a tightening of banks' lending criteria have fuelled fears that the recent improved trend could hit a turning point.
Debt charity the Consumer Credit Counselling Service (CCCS) has warned that six million households are living on the edge. Real disposable incomes dropped to their lowest levels in nine years in the first quarter of this year at £273 a week, the lowest level since 2003, an Office for National Statistics (ONS) study found last month.
© 2012 Press Association