The number of personal insolvencies cases in the UK has gone up by 8% in the second quarter of 2014.
Figures from the Insolvency Service showed that 27,029 people experienced serious financial problems between April and June, an increase of 2,088 on the previous three-month period.
Of these, 5,452 people declared bankruptcy, 14,571 entered into Individual Voluntary Arrangements (IVAs) with creditors and 7,006 signed Debt Relief Orders (DROs).
After the recession, personal insolvencies fell sharply but now that trend appears to be reversing.
Bankruptcy is considered the most serious type of insolvency. It is approved, the person’s debts are written off after a period of time and creditors have no recourse to legal action although an individual’s property may be seized to pay creditors.
An IVA will see the debtor offer to pay a certain amount to be shared among all their creditors.
IVAs are now said to be at a record high.
DROs are an alternative to bankruptcy used for smaller debts – up to £15,000 – when the debtor has assets of less than £300. The debt is usually discharged at the end of a year.
Companies going into liquidation were not as numerous as earlier in the year. In the second quarter, 3,500 went into liquidation, a fall of nearly 7% over the first quarter when the majority of these were in construction (1,920), followed by retail (1,847).
The number of liquidations has fallen gradually since the recession, but a surge in the interest rate could bring extra pressure on businesses.
