Personal insolvencies fall to 10 year low
01/02/2015
The number of people declaring insolvency reached its lowest point in 10 years in 2015, according to official figures from the Insolvency Service.
Last year, 79,965 people declared insolvency, down 19% on 2014. This was the fifth consecutive annual decrease and the lowest total number of insolvencies in a decade.
Insolvency is a way for people to handle unmanageable debt, and it includes bankruptcy, Individual Voluntary Arrangements (IVAs) and Debt Relief Orders. Phillip Sykes, president of R3, the insolvency trade body, said:
"It's welcome that insolvency numbers fell so far from their 2010 peak in 2015.
“Continuing low inflation and a growing economy have helped people pay down or service debts. The return of real wage growth has put a big dent in insolvency numbers."
The number of companies declaring insolvency also fell to 14,629 last year, which is 10% lower than 2014 and the lowest total since 1989.
Industry experts have claimed that companies are now dealing with debt earlier while lenders are seeing little value in shutting down businesses that are in arrears. The falling price of oil has also helped businesses bring costs down.
Andrew Tate, vice-president of insolvency professionals trade body R3, said:
"There has been a general trend of companies looking to turn things around before reaching a position where they need to enter a formal insolvency process.
"Creditor forbearance is playing a part too: banks, in particular, are much more willing to work with companies in financial trouble than they were in the early 90s.
"Compulsory liquidation is often seen as less dynamic process, which is less likely to lead to a rescue of the business than other insolvency procedures. It is generally used by creditors as a last resort when a company doesn't pay.”
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