Personal insolvencies hit record high

Official statistics out today show that personal insolvencies have reached record highs of more than 130,000 for 2009.

The Insolvency Service issued its fourth quarter and statistics for 2009 showing there were 35,574 personal insolvencies made up of 17,007 bankruptcies; 13,219 Individual Voluntary Arrangements and; 5,348 Debt Relief Orders.

Over the year there were 134,142 personal insolvencies, including bankruptcies, IVAs and DROs, breaking the 2008 record of 106,544. The huge 25 % rise in numbers will in part be due to the introduction of DROs in early 2009.

Neil Smyth, partner in reconstruction and corporate recovery at Taylor Wessing, said: "Up to 90% of the personal insolvencies for the last quarter of 2009 are likely to be made up of debtor petitions or debt relief orders that result in no return for creditors, but do offer a solution for individuals in financial difficulty."

"It would, therefore, be more sensible to have a system for debtor petitions that is more efficient for both taxpayers and debtors alike. However, the easier and cheaper bankruptcy becomes, it is inevitable that the number of individuals going down that route will increase, meaning more consumer debt write off and, therefore, more expensive and less available credit for others.

"The Insolvency Service is in no better position to deal with the increased caseload than the courts, meaning a reduction in the ability to stop issues like ‘bankruptcy tourism’ by individuals not truly based in this country, but wishing take advantage of our more debtor friendly system," he said.