Personal insolvencies up 23%

by Gill Montia

Story link: Personal insolvencies up 23%

The Insolvency Service has reported a sharp rise in personal insolvencies in England and Wales during the first quarter of 2009.

A record 19,062 individuals entered bankruptcy, representing a 23.4% rise on the same period of 2008.

Individual Voluntary Arrangements (IVAs), which allow borrowers to repay only a proportion of their debt, were taken out by 10,713 people.

Analysts are expecting the trend to continue throughout 2009 and possibly for a further three years, as the recession bites and unemployment rises.

In addition, Debt Relief Orders, which came into effect in England and Wales on 6th April, will push the figures higher because the new legislation allows borrowers who meet certain criteria to have a debt of up to £15,000 written off by the Official Receiver.

Accountancy and recovery firm, KPMG, therefore expects personal insolvencies to hit 150,000 during 2009 and for creditors, this could mean writing off at least £1.1 billion in consumer debt.

Corporate insolvencies in England and Wales fell to 1,783 during the first three months of the year, with the number of receiverships and administrations down 27% on the final quarter of 2008.

However, the number of compulsory company liquidations increased to 4,941 during the first quarter, representing a 7.1% rise on the previous three months.