PwC: Personal insolvencies down by 10.2% on the same time last year

Figures released today for the second quarter of 2012 by the Government's Insolvency Service reveal that overall levels of personal insolvency in England and Wales have continued to fall, with 27,390 people entering into bankruptcy, Individual Voluntary Arrangements (IVAs) or taking advantage of the Government's Debt Relief Orders (DROs).  This represents a decrease of 10.2% on the same period last year when 30,502 people entered insolvency.

The number of bankruptcies has fallen since the first quarter of 2012.  Some 8,088 people entered bankruptcy in the second quarter, down from 9,132 in the first quarter of this year.  This also signals a significant decline of 27.1% in the number of bankruptcies on the corresponding period a year ago.

Individual Voluntary Arrangements (IVOs) have fallen by 2.98% on the previous quarter and are down by 6.6% on the same period last year, with 11,346 people entering into an IVA between April and June 2012.  Debt Relief Orders (DROs) saw an increase of 9.6% on the same period in 2011 with 7,956 people making the orders.

Nick Reed, director and personal insolvency expert at PwC in Leeds, said:

 "It is pleasing to see an overall fall in personal insolvencies, but this shouldn’t distract from the fact that the overall numbers are still significant.  This is being driven by a reduction in real disposable income and salaries not keeping pace with inflation, coupled with uncertain employment prospects.  Clearly, consumers are still struggling with high levels of debt and a lack of refinancing options is exacerbating the problem. 

 “There is a continuing decline in bankruptcies year on year.  However, DROs have been on the rise since Q4 2011, suggesting they are replacing what would have been in some cases bankruptcies.  On the whole, DROs are proving effective in dealing with those debtors who have limited income and assets.

 “Looking ahead, the remainder of 2012 will be especially challenging for self employed business people who continue to suffer in the current economic conditions, particularly those in the retail sector, where we may see an increase in bankruptcies.”

Notes for editors

•  The Official Insolvency Statistics for Q2 2012 for England and Wales were released on 3 August 2012.
• The Tribunals, Courts and Enforcement Act 2007 introduced a new route into personal insolvency called the debt relief order (DRO), which came into effect from 6 April 2009.  DROs provide debt relief, subject to some restrictions, and are suitable for people domiciled in England and Wales who do not own their own home, have little surplus income (no more than £50 a month), assets (other than possibly a car) not exceeding £300, and less than £15,000 of debt. DROs do not involve the courts; they are run by The Insolvency Service in partnership with skilled debt advisers, called approved intermediaries.  A DRO lasts for a period of one year before discharge and, as for bankruptcy, there are penalties in place for debtors who seek to abuse the process.
• Additional information may be found on The Insolvency Service website here:

http://www.insolvencydirect.bis.gov.uk