Simplified bankruptcies over-take traditional ones for first time

by Rachael Singh

More from this author

02 Nov 2012

  • Comments
Lee Manning

A SIMPLIFIED version of a bankruptcy for individuals with low levels of debt and assets has overtaken traditional ones for the first time since its introduction.

Although bankruptcies were 20.5% down on the same period a year ago, Debt Relief Orders (DROs) were up 2.3% according to third quarter statistics from government body the Insolvency Service.

DROs were introduced in April 2009 and are essentially a simplified bankruptcy for individuals with debts lower than £15,000 as well as assets and surplus income of less than £300.

Initially, DROs received disappointing take-up as pensions were included as assets. However, since the change to remove pensions as assets in March 2011, the insolvency process has continued to gain popularity.

DROs for the third quarter actually fell slightly to 7,777 in Q3 from 7,956 in Q2. However, it outstripped bankruptcies which saw 7,617 in the third quarter compared to 8,088 for the second.

Overall personal insolvencies continued to decline to 28,062 in the third quarter which represents a 7.2% drop compared to the same period a year ago.

Individual Voluntary Arrangements remain the most popular personal insolvency process. but declined 2.9% compared to a year ago to 12,688.

Louise Brittain, Deloitte partner, warned although bankruptcies are declining, a new breed of this type of process are taking hold.

"We are seeing more professionals going bankrupt – unsurprisingly, due to tax bills coming through, increased costs, reductions in income, assets values and the availability of credit," she said.

However, the figures paint a more worrying figure, according to insolvency trade body president R3 Lee Manning (pictured). He believes that the latest statistics are hiding a truer picture that many individuals are using unregulated debt relief processes.

"Many others are likely to be in an informal insolvency procedure such a debt management plan or have resorted to taking out a payday loan to make ends meet. R3's research, conducted by Comres, in July revealed that four million adults said they are likely to seek a payday loan in the next six months," he said.

"Over half the population (54%) worry about their current levels of debt, while 51% struggle to make it to payday each month, especially in the 35-44 age group (average of 68%).

"This debt concern may be compounded over the next few months with additional pressures being applied to the purse strings through energy price hikes and Christmas; these seasonal expenditures are likely to be reflected in the next quarter's personal insolvency figures which may see a further rise."

Visitor comments

blog comments powered by Disqus
display:none

Add your comment

We won't publish your address


By submitting a comment you agree to abide by our Terms & Conditions

Your comment will be moderated before publication

Submit
  • Send

Financial Planning and Performance AnalystCabinet Office-Greater London-Competitive

 
 
 
 
 
 
 
 

 

Newsletters

Get the latest financial news sent directly to your inbox

  • Best Practice
  • Business
  • Daily Newsletter
  • Essentials

Careers

Search for jobs
Click to search our database of all the latest accountancy roles

Create a profile
Click to set up your profile and let the best recruiters find you

Jobs by email
Sign up to receive regular updates with the latest roles suitable for you

Briefings

budget-management

Why budgeting fails: One management system is not enough

If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.

cchcover

iXBRL: Taking stock. Looking forward

In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.