Insolvencies Up in 2008

Insolvency figures have risen for the first time in over a year a report out today reveals, with 25,264 individuals in England and Wales declaring themselves insolvent during the first quarter.

The figures, announced by The Insolvency Service, represent a 1.7% increase on numbers seen in the final three months of 2007 though they are still down by 13.2% on those recorded during the same period last year.

The number of bankruptcies declared during the first quarter increased only slightly with a 0.1% rise taking the official figure to 15,651. However, the trend for debtors to initiate bankruptcy proceedings continued and as such 84% of the petitions submitted before the end of March this year were by those declaring themselves bankrupt.

The 9,614 IVAs agreed in the first three months of 2008 represent a 4.3% rise from levels seen in the final quarter of 2007 and a 22% increase on the same period last year. However, this is largely down to IVA agreements being partially suspended for a number of months in 2007 as a dispute about the suitability of this solution for debtors was settled, resulting in as many as 1 in 6 applications being rejected.

Reaction to these figures by the economic community has been largely skeptical with a number of bodies claiming that they do not accurately reflect the actual number of individuals seeking a insolvency based resolution to their financial problems as debt management plans are not included despite becoming an increasingly popular alternative solution.

Concern has also been raised over the likelihood that the number of insolvencies will rise sharply over the next quarter as elevated living costs, a decreased availability of credit and an increased reliance on more expensive unsecured debt drive more people into unmanageable debt.