RECORD level of Insolvencies - Official Stats for Q2 2009 - Including DROs

fermi

STATISTICS RELEASE: INSOLVENCIES IN THE SECOND QUARTER 2009

INDIVIDUAL INSOLVENCIES (not seasonally adjusted - see ‘Notes to Editors’ paragraph 13) There were 33,073 individual insolvencies in England and Wales in the second quarter of 2009. This was an increase of 27.4% on the same period a year ago.

This was made up of 18,870 bankruptcies (which were up 15.3% on the corresponding quarter of the previous year), 12,225 Individual Voluntary Arrangements (IVAs), (which were up 27.4% on the corresponding quarter of the previous year) and 1,978 Debt Relief Orders (DROs) (see ‘Notes to Editors’ paragraph 12).




The Debt Relief Order is a new individual insolvency procedure which came into force on 6 April 2009 and which provides an alternative route into personal insolvency for certain categories of over-indebted individuals, subject to some restrictions. Additional details are provided under the “Notes to Editors”, paragraph 12 and on the Insolvency Service website. Some of those who had a DRO approved in Q2 2009 would have been declared bankrupt had the DRO route not been an option, but it is not possible to quantify this proportion.

In the second quarter of 2009, 86% of bankruptcies were made on the petition of the debtor, similar to the previous quarter and slightly higher than throughout 2007 and 2008 as a whole. The percentage of bankruptcy orders involving trading debts (self-employed bankruptcies) was 13.7% in the first quarter of 2009 (second quarter 2009 figures for trading-related bankruptcies are not yet available), which is an increase from 12.9% in the previous quarter.

fermi

BBC News Article: Personal insolvency at new record

The number of people being declared insolvent has hit a new record in England and Wales.

There were 33,073 personal insolvencies in the second quarter of 2009, said the government's Insolvency Service.

That was a 9% rise on the first three months of the year, and 27% more than at the same time last.

The number of companies going bust in England and Wales continued to fall, down by 14% on the previous quarter but still 23% higher than a year ago.

In April, a new form of personal insolvency was introduced, called a Debt Relief Order (DRO).

Counted for the first time, these amounted to 1,978 in April, May and June.

The DRO is a new, cheaper, form of insolvency procedure aimed at helping people wipe the slate clean if they have debts of less than £15,000 and few assets.

On Thursday, the debt advice charity, the Consumer Credit Counselling Service (CCCS) said they were the "best solution" for many people in debt, and predicted that they would eventually outstrip bankruptcies.

"As a result, total bankruptcies may soar," said Malcolm Hurlston of the CCCS.

"But that will be good news rather than bad, since many more people in serious debt will have found the right solution.

"In the past, stigma and cost have put people off going bankrupt, in circumstances when it would have been best for them and neutral for their lenders," he added.

Personal insolvency

The recession has been driving up the number of personal insolvencies since the end of 2007.

In the last three months of that year, 23,830 people went bust.
The number doing so now has risen by nearly 40%.

Within the overall figure of 33,073 for the second quarter of this year, formal bankruptcy orders dropped to 18,870 from 20,446 in the previous three months.

But the overall personal insolvency figure was pushed up by the advent of the new DROs, as well as a big bounce back in the use of Individual Voluntary Arrangements (IVAs), which rose in the quarter by 25%, to 12,225.

Alan Tomlinson of the Manchester based insolvency firm Tomlinsons said many of the people he was dealing with were in very serious difficulty.

"The sharp rise in the number of individual insolvencies is a reflection of the ongoing fallout from irresponsible borrowing in the good years and people living beyond, in many cases way beyond, their means," he said.

"People need to be very wary of entering into an IVA, as in many cases it simply isn't the right solution. Other options such as bankruptcy may be more appropriate," he added.

So_Sad_Angel

Thanks for that fermi.

I think that added publicity at a time when everyone seems to be struggling financially will push this figure still higher over the next 12 months.

Not as many DROs as I thought there would be, only 1978 DROs out of 33073 insolvencies (6%) ....maybe the DRO guidelines are too restrictive? ....so few won`t have eased the pressures on ORs very much.

Angiex

rog2

We seem to be saying the same thing every time new 'Insolvency' statistics are issued, lately.
When will they start showing a 'fall' in 'personal Insolvencies'?
I wonder why the take-up of DROs is so (relatively) low?

fatou256

i have just read the article below saying that DRo are so low due to some complication in the DRO process and as such there is a backlog of application ... however how true i do not know !
According to sky news there is a slight shortfall in personal insolvency
http://news.sky.com/skynews/Home/Business/Personal-Insolvencies-Hit-Record-High-33073-Cases-In-Second-Three-Months-Of-Year/Article/200908115356159?lpos=Business_First_Home_Article_Teaser_Region_6&lid=ARTICLE_15356159_Personal_Insolvencies_Hit_Record_High%3A_33%2C073_Cases_In_Second_Three_Months_Of_Year

debtinfo

I dont think that the pressure on OR's will ease as the people doing DRO's are the ones that cannot afford a bankruptcy and so will only add to the numbers

peppa-pig

woooohoooo i am officially a statistic!!

fiveyearplan

I think the level of DROs is low for 2 reasons.

1) not many people know about them
2) most people have a debt over the £15k mark.

iquit

Thanks for this fermi. To think of just 145 251 individual insolvencies in the last year is narrow minded. What about the partners, spouses, children who are also affected by these bankruptcies. As always someone has to get the dig in and I quote the quote given by Mr Alan Tomlinson "The sharp rise in the number of individual insolvencies is a reflection of the ongoing fallout from irresponsible borrowing in the good years and people living beyond, in many cases way beyond, their means," . We didn't all become BR because of irresponsible borrowing, not that anyone cares to hear or know our side of the story. With the ever growing redundancies I hate to think what next years figures will be like. I hope they all find this fantastic forum and get help with the difficult process