THE number of people declared insolvent fell by 5% in the three months to the end of September – the first year-on-year drop in five years, figures showed yesterday.

But the Insolvency Service statistics also reveal that within the figure the number of bankruptcies rose 2.2% on the same period last year, to 15,833.

The rise in bankruptcies follows a dispute between banks and Individual Voluntary Arrangement (IVA) providers, which has seen the number of IVAs in the quarter fall by 14.3% on the same period last year.

IVAs are arrangements that can prevent people going into bankruptcy, but they have come under mounting criticism over their suitability for some consumers and their arrangement fees.

Yesterday’s figures showed there were 26,072 personal insolvencies – people who were either declared bankrupt or took out an IVA – in England in Wales, which is down 3% on the previous quarter.

The drop is the third quarterly fall in a row and the annual decrease, the first since 2002, was greater than expected.

But insolvency expert Pay Boyden of PricewaterhouseCoopers Business Recovery Services said recent credit card debt figures could signal further insolvency misery to come.

He said, “It is worrying that credit card debt rose in September for the first time in two years, so this may be an indication that we are heading for another wave of insolvency rises next year.”

Meanwhile, data from the Ministry of Justice shows that the number of orders for home repossessions in England and Wales fell by 1% in the third quarter year on year, to 23,806.

The Council of Mortgage Lenders predicted only days ago that the number of repossessions could jump by 50% next year as borrowers feel the pinch from five interest rate rises since last August and a tightening in lending criteria amid the credit crunch.

In August, CML figures revealing the actual number of home repossessions across the UK showed that repossessions in the first half rose by nearly a third to 14,000. It predicts that will rise to 30,000 by year end, up 32% on 2006.

While the numbers are still far behind the 75,000 annual repossessions recorded at the height of the housing crash in the early 1990s, it is a cause for concern, according to Mr Boyden.

He said, “Rises in credit card debt and repossessions are worrying signs that consumers are turning to unsecured borrowing as a means to make ends meet.”


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