Personal Insolvencies Fall As Consumers Tighten Belts

Michelle Remo, “Big 4″ observer
August 07, 2012 /

Figures show that 27,390 people went into Bankruptcy, entered into an Individual Voluntary Arrangement (IVA) or a Debt Relief Order (DRO) between April and July 2012.

This was an overall decrease of 10.2 per cent compared to the same quarter in 2011. As expected DRO numbers continue an upward trend with a 9.6 per cent increase on the same period last year. The second quarter figures for 2012 was released by the Insolvency Service.

Chris Nutting, Director of Personal Insolvency at KPMG said: “The figures continue to demonstrate a declining trend in personal insolvency with overall numbers down 10.2 per cent on the same period last year. I expect the underlying downward trend to continue as households continue to adapt to a maturing culture of more prudent financial management and restricted access to credit.

“Nevertheless the figures give a mixed picture in terms of the methods of debt relief available with bankruptcy numbers showing a significant reduction of 27.1per cent and IVAs showing a reduction of 6.6 per cent in stark contrast to increasing numbers of DROs which have increased by 9.6 per cent.

“The anticipated uptake of DROs over bankruptcy seems to be gaining momentum to the extent that over the last year the use of DROs as an effective method of relief has grown to almost be as popular as bankruptcy each having a market share of 29 per cent.

“This demonstrates the changing profile of the market, with those debtors having few assets and relatively low levels of debt choosing DROs, while those with realisable assets (whether physical assets or contributions from income) opting for bankruptcy and IVAs.

“Some experts are predicting that the UK economy will see a brief reprieve following the Olympics but that we can expect to see a further downturn in 2013. A continuous increase in household expenditure combined with published stats this week that property values have decreased at their fastest annual rate for three years, means that households want to protect their income and conserve their expenditure.

“A lack of spending and more cautious purchases by risk averse households, has contributed to the reduction in the overall number of insolvencies. DRO’s continue to gather momentum and consumers with a relatively lower level of indebtedness and few assets are finding the now established DRO process a welcome solution to dealing with their debts.

“Whilst income levels at best, remain static, the ongoing long term increases in utilities, fuel and food could push households into a position where they need to compromise their creditors, as already restricted expenditure is strained further. This may lead consumers to consider more formal personal insolvency options.”

 

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