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More people are starting solutions to deal with insolvency
The Insolvency Service has released statistics for the number of people starting solutions to deal with insolvency across the UK between April and June. The stats show that there was an increase, but you have to look a little closer at the numbers to see what’s really going on.
What is insolvency?
Just before we delve into the report, it might be useful to go over exactly what insolvency means.
If you’re insolvent, it means you can’t afford to repay your debts, or that your debts amount to more than the value of all assets that you own.
Even though being insolvent can be a very serious situation, there are ways to deal with it. Sequestration, Trust Deeds and Minimal Asset Process are the three solutions that help people in this position in Scotland. Bankruptcy, IVAs and Debt Relief Orders are available in the rest of the UK.
More insolvencies but fewer bankruptcies
Overall, there were more insolvency solutions started in England and Wales in the second quarter of this year compared to the first quarter.
22,503 people became insolvent in England and Wales in the second quarter of 2016, a 6.9% increase on the previous quarter, and 22.4% higher when compared with the same quarter in 2015.
This is due in part to more people starting Individual Voluntary Arrangements (IVAs). There was a 15.4% increase in IVAs in England and Wales in this quarter compared to the first quarter of the year – 12,225 people needed to start this solution.
There were also more people starting a Debt Relief Order (DRO), when compared with the first quarter of the year and the same quarter last year. This is probably because of a change in the eligibility criteria brought in on 1st October 2015. As long as you meet all the other criteria, you are now able to apply for a DRO if you have up to £20,000 worth of unsecured debt – before this, the limit was £15,000. This means that more people are able to apply for this solution than before, which is likely to be one reason for the increase.
All in all, more people are becoming insolvent than before and this is the fourth quarter in a row where this has happened.
Although there was an overall increase in the number of insolvencies because of IVAs and DROs, there was actually a decrease in the number of bankruptcies. 3,537 people applied to go bankrupt in quarter two of 2016, a decrease of 5.4% compared to last quarter and 11.2% lower than quarter two in 2015. This is actually the lowest it’s been since quarter three of 1990.
What to do if you feel you need to deal with insolvency
As we’ve said, whilst insolvency can seem like a big step, in the right circumstances it can be the best way to deal with unmanageable debt. There are other options though.
A good way to find out if you need to start a solution to deal with insolvency is to speak to a debt expert. You can contact one here at Debt Advisory Centre by using any one of the options on the left of the page. They will gather all the relevant information about your situation and tell you whether you need to start a solution and if so, which one is right for you.
by Christine WalshBack to blog home