Personal insolvencies drop to lowest level in a decade

http://www.theguardian.com/money/2015/apr/29/personal-insolvencies-drop-lowest-level-decade

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Fewer people were declared insolvent in the first three months of 2015 than at any point in almost a decade, official figures show.

The Insolvency Service said the number of individual insolvencies fell by 8.7% in the first quarter, to 20,826, which is also 18.6% lower than a year earlier.

The figures for England and Wales build on last year’s progress, when the annual total dipped below 100,000 for the first time since 2005.

The data also revealed that there were 4,052 company insolvencies in the first quarter of the year, down 1.3% on the previous quarter and extending a downward trend that started a year ago.

The quarterly figure for personal insolvencies is the lowest since the final three months of 2005 when 19,511 were recorded, representing the third quarter of decline in a row.

The decline in personal insolvencies comes as low interest rates have kept the cost of borrowing relatively cheap.

There are three types of official personal insolvency in England and Wales. Bankruptcies – which tend to be seen as a last resort for borrowers – declined to 4,209 in the quarter, 6.6% lower than the previous three months and 22.5% lower than the same period a year earlier.

Individual voluntary arrangements – where money is shared out between creditors – also fell sharply to 10,405. Debt relief orders (DROs) – which are aimed at people with smaller amounts of debt but no realistic prospect of paying it off – were down at 6,213.DROs were introduced in 2009 and their use has been declining since 2012.

Matthew Chadwick, head of personal insolvency at accountancy firm BDO, said the buoyant jobs market, low food, fuel and energy price inflation, and healthy retail sales were helping the figures.

However, he warned there may be a small rise in personal insolvencies this year as creditors become more confident about pursuing old debts.

He added: “If access to consumer credit is increased, this may also have a knock-on impact.

“Increasing interest rates would also be likely to push up insolvencies. Though there is a lot of good news, the economic recovery is still relatively fragile and higher rates are likely to tip some individuals into insolvency.”