Debt Advisory Centre comments on Insolvency Statistics
Melanie Taylor of Debt Advisory Centre comments on the insolvency statistics published this morning:
"Q1 brought a fall in bankruptcies and Debt Relief Orders, which more than offset a slight increase in IVAs - bringing personal insolvencies in England and Wales down to the lowest level since Q1 2008.
"In the longer term, we're seeing some big changes, driven by falling debt levels and falling disposable incomes.
"More people are struggling with debts below the DRO's £15,000 limit, while others simply can't afford bankruptcy's up-front costs. Debt Relief Orders have trebled in just four years - and they've actually outnumbered bankruptcies for the last three quarters.
"At the same time, fewer bankrupts are having to make monthly contributions, while those that do are contributing less. Again, it shows that disposable incomes are shrinking.
"People are more aware of the alternatives to bankruptcy - the steep drop in bankruptcies is largely down to falling numbers of people petitioning for their own bankruptcy.
"I think bankruptcy numbers will fall for the foreseeable future, while DRO numbers will rise - particularly if changes to the benefits system lead to more people on lower incomes falling into serious debt problems.
"IVA numbers have remained far more constant. After a 13.3% drop in Q4 last year, they rose slightly (by 1.3%) in Q1 2013.
"Look behind the headline IVA figures and you'll find further evidence of falling debt levels and disposable incomes. Lenders are approving more IVA proposals that deal with smaller debts, offer lower contributions - or both.
"I expect insolvency levels to keep falling. With lenders more careful about lending and borrowers wary of borrowing more, people are carrying less debt these days.
"The kind of debt people are carrying is changing, as we see more falling behind on debts to payday lenders. Compared with mainstream lenders, they're still relatively new to dealing with customers who are struggling to repay - it's quite a learning curve, but IPs and debt advisers are there to help find a way forward that balances the interests of client and creditor."
For more information, visit the Debt Advisory Centre website at www.debtadvisorycentre.co.uk