Personal Insolvencies down 9%

Official statistics from The Insolvency Service show that personal insolvencies have decreased by almost 9% from around the same time period last year.

This was welcome news as the country still struggles to recover from the double –dip recession.

The new data reveal the number of people who have declared themselves bust and made formal agreement with creditors  is at it’ lowest since the financial crash of 2008.

Bankruptcies are also reported to be down 24% since 2011. Bankruptcy differs from insolvency in that it is imposed on a person who cannot pay their bills by a court. Additionally, the debtor’s assets can be sold to cover the cost of whatever they owe. The cost of bankruptcy is around £700 and the debtor is obligated to pay all associated court fees.

The decrease in bankruptcies has been attributed to recently devised Debt Relief Orders. A Debt Relief Order is a cheaper alternative to going bankrupt. This alternative was introduced in 2009 for low income individuals with debts under £15 000.

Debt charities have reported up to 36% increases in the number of Debt Relief Orders they have administered in the last year. This was supported by information from The Insolvency Office which showed since 2011, Debt Relief Orders had increased by 7%.

The Insolvency Office also reported that company liquidations were down 4% from the last year.

The news was not so good for small businesses across the country. The data revealed self- employed workers had more debt compared to other Britons. People who run their own businesses also had more instances of risky unsecure debt.  Nearly a quarter of bankruptcy orders in the third quarter of 2012 were for self – employed workers.

Debt charity StepChange had earlier in the year reported that self-employed people had typically four times as much debt as their peers.  A spokesperson for the charity suggested those who are self-employed “are taking on significant debts in order to invest in their businesses…but that too often the debt burden can become too much to bear”.