Massive rise in cases of personal insolvency

The statistics, which are released quarterly, reported the level of personal and company insolvency throughout the UK, and showed the number of insolvencies between June and the end of September, 2009.
The number of personal insolvencies is also up 6.2% on the second quarter of 2009, and shows a large increase when compared to the same period in 2008. The figure was made up of 18,347 bankruptcies, 12,390 Individual Voluntary Arrangements (IVAs) and 4,505 Debt Relief Orders (DROs).

During the third quarter, 85% of the bankruptcy orders were made on the behalf of the debtor, and not the creditor, and the percentage of debtor bankruptcy petitions has been slightly higher throughout 2009, compared to the same period in 2008 (bankruptcy has risen by 6.4%).

It was reported that up to 4,500 Debt Relief Orders may in fact have declared bankruptcy instead during the third quarter, if the new practice had not been put in place earlier this year. Bankruptcies were expected to have been higher if the DRO had not been introduced, but it was not possible to estimate what the figure would have been.

Individual Voluntary Arrangements (IVAs) were up by 20.9% on the same quarter in 2008. An IVA offers consumers a debt solution that is a viable alternative to bankruptcy, and is legally binding. An IVA allows people to pay off their debts with a strict reduced payment plan, usually over a 5 year period. As long as the terms of the arrangement are agreed and upheld, debtors can clear their debts within a set amount of time with the help of an IVA.

As the Debt Relief Order came into effect on 6 April 2009, it could not be compared to the same quarter of 2008. The Debt Relief Order (DRO) was introduced to provide individuals in England and Wales an alternative route to bankruptcy into personal insolvency. The new individual insolvency procedure is subject to some restrictions however, including that the consumer must have under £15,000 debt and must not own their own home.

With increasing unemployment, pay reductions and tighter restrictions from lenders since the recession started to bite, the result has been a rise in personal insolvency, which looks likely to continue into 2010. Free debt help and advice is available online or directly, and if you are struggling with debt, take your time to look around and find a regulated debt help company who can help you get rid of debt forever.