Finance News

Number of people going bust shrinks by 10 per cent

The number of people that have been declared as insolvent in the UK has dropped 10% compared to a year ago. The Insolvency Service reported today that there were 27,390 individual insolvencies in England and Wales between April and June this year, which is 10.2 per cent lower than the same period a year ago.

Experts have warned that the figures do not show the true situation and are disguising a much worse picture. They claim that this is because the only reason the figure is lower, is because the banks are giving customers more leeway when they are in difficulty rather than calling in their bad debts and passing them on to collections agencies.

The statistics presented are in stark contrast to the general UK economic climate, with the British economy shrinking by 0.7% in the last quarter as the nation tries to recover from its longest double dip recession in years. The figures do not include debt management plans or other financial arrangements, where banks often provide customers with a short period of time to get back on top of their arrears. Often this is done on a 6 month time period at a time.

Some experts believe that the rise in people resorting to debt management plans or short term arrangements with the banks is why the figures appear so positive.
Alec Pillmoor, who is head of personal insolvency at Baker Tilly, said: ‘The 10 per cent fall in the number of personal insolvencies is very welcome, although I am concerned that this headline figure masks the underlying financial problems that many households continue to face.’

‘The recent economic review suggests that real household income is at its lowest since 2005 and the unexpected fall in GDP reported last month has made many people question their job security.’

Joanna Elson OBE, chief executive of the Money Advice Trust, said that ‘People struggling with debt often simply can’t afford the £700 it costs to go bankrupt – £525 for the deposit plus £175 for the court fee – even though that would otherwise be their best option.