Personal insolvencies fall as consumers tighten their belts

The second quarter figures for 2012, released by the Insolvency Service today, confirmed 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. 

Mark Firmin, Yorkshire based UK regional head of Restructuring at KPMG, said:

“The figures continue to demonstrate a declining trend in personal insolvency which I expect to continue as households adapt to a maturing culture of more prudent financial management and restricted access to credit.

“The figures give changing picture in terms of the methods of debt relief available with bankruptcy numbers showing a significant reduction of 27.1 per cent and IVAs falling by 6.6 per cent, in stark contrast to DROs increasing by nearly 10 per cent. This takes its market share, as a form of relief to 29 percent; the same as bankruptcy.

“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 showing property values have decreased at their fastest annual rate for three years, means that households want to protect their income and conserve their expenditure.

“Whilst income levels at best, remain static, the ongoing 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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