Insolvency at lowest rate since 2006
04/11/2014
According to official figures from The Insolvency Service, insolvency is at it’s lowest rate since before the Financial Crisis in 2008.
The rate of insolvency has fallen over the past year from 0.6% in 2013 to 0.22% in the 12 months to September 2014.This is the lowest rate since the spring of 2006, the figures show.
A person falls insolvent when they are not able to pay their debts when they are due and decide to enter into bankruptcy.
The number of bankruptcies has been on a decreasing trend since 2010, with the rate of decrease most rapid following the introduction of Debt Relief Orders (DROs) in 2009. There were 4,886 bankruptcy orders in the third quarter of 2014, the lowest level since 1999.DRO’s were introduced as an alternative option to bankruptcy for people with debts less than £15,000.
Many people have decided to apply for an Individual Voluntary Agreement (IVA) instead of going bankrupt due to the fact that this is potentially cheaper, and less damaging to credit files.
Graham Horne, the Insolvency Service's deputy chief executive said:
"Today's figures show that the personal insolvency rate is at its lowest level since 2006.
“It is still important that people experiencing financial difficulties should seek early advice."
Matthew Chadwick, Head of personal insolvency at accountancy firm BDO , said:
“Jobs figures are up, mortgage rates are down - and becoming more competitive - and interest and inflation rates are stable, which in theory should boost economic health and confidence.
“However, these positives are counterbalanced by sluggish or non-existent wage growth, lower-than-expected tax revenues - suggesting that the new jobs being created may not all pay well - and market volatility caused by worries over the Chinese and Eurozone economies.
“Paradoxically, we may see personal insolvencies rise as confidence returns. Then, people may feel more comfortable with taking out new credit, and lenders more comfortable with collecting old debts."
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