Date 1 March 2011
The BBC has published statistics (confirmed on the Insolvency Service Website) showing that in 2010, the number of personal insolvencies in England & Wales rose to an all-time high of 135,089. At face value, these statistics would appear to totally confound the view that the U.K economy has turned a corner and is on the road to (albeit fragile) recovery.
Yet from closer examination, do the figures necessarily paint a picture of doom and gloom? For example, whilst 59,194 individuals were made subject to bankruptcy orders in 2010 (the insolvency measure which is by far the most onerous on an individual), this actually represents a fall of a 20.7% on the 74,670 bankruptcy orders made in 2009. Indeed, the number of bankruptcy orders granted in 2010 was the lowest since 2005.
Rather, it is the exponential growth in the number of Individual Voluntary Arrangements (IVAs) and Debt Relief Orders (DROs) entered into in recent years that has caused the number of personal insolvencies to swell. Some commentators point to this rise as indicative of the general economic decline in the U.K. The alternate view however, are that IVAs and DROs now enable creditors to tackle debts which previously, would not have been economically viable due to restrictive costs of obtaining a bankruptcy order. Hence the introduction of IVAs and DROs made a rise in personal insolvencies inevitable.
In the experience of many insolvency practitioners and legal advisors however, deconstruction of the statistics brings only partial comfort. With the seemingly unabated rises in the costs of living, continuing reluctance by banks to engage in commercial lending and inflation not being matched by wage growth, many more individuals are now living in the shadow of insolvency, with people on low incomes, exposed to distressed companies (in the form of personal guarantees) or possessing tax / utility bill arrears being particularly at risk.
On balance therefore, whilst an analysis of the statistics suggest not a lot has changed in terms of the trends within the numbers of personal insolvencies, the fact that the numbers keep growing is a clear indictment that the financial prospects for many will for the foreseeable future, remain highly challenging.
If you would like more information or advice relating to a specific matter, please do not hesitate to contact Ben Ashworth on 01727 798058 or by email at ben.ashworth@salaw.com or any member of the Commercial Dispute Resolution team.
© SA LAW 2011
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