Personal insolvency pandemic set to continue in to 2012

Personal insolvencies have heated up during the summer months with unprecedented highs in July and August 2009 contributing to the record quarterly figures released last week by the Insolvency Service.

Figures for July were 29% higher than the same time in 2008, while August saw a rise of 32% according to independent analysis by leading personal insolvency specialist Tenon Recovery. September levels were also up on previous years, although not to such a large extent.

Mark Sands, Director of Personal Insolvency at Tenon Recovery, said:

There is normally a fall in the level of personal insolvencies during August, however this hasnt happened in 2009. Instead of holidays taking priority, people have been staying in the UK to try and address their financial problems or go through the insolvency process, meaning we have seen levels soar by a third in July and August.

Levels did drop off in September, but they are still way up on previous years and this is an indication of things to come. We have already exceeded the annual record for personal insolvencies and if this trend continues we are likely to see levels exceed 130,000 by the end of the year.

We expect to see around 150,000 personal insolvencies next year, with record levels set to stay until 2012.

Analysis reveals a dramatic growth in the number of people entering into debt relief orders (DROs), up 128% on the previous quarter. In contrast, the number of people being declared bankrupt has dropped slightly in comparison to last quarters figures, down 2.8%. Individual Voluntary Arrangements rose slightly, by 1.3%.

Statistics from Tenon Tracker show that 55% of people entering personal insolvency are male, while the average age of those entering into personal insolvency is 42. However, 62% of people entering into a DRO are women, compared to 40% of those declared bankrupt and 44% of people entering into an IVA.

Mark Sands added:

There is far less stigma and distress associated with Debt Relief Orders than other forms of personal insolvency, which explains the considerable increase in their use.

The rise in their popularity also suggests that more people are being proactive in confronting their financial problems and addressing their debt levels before they exceed 15,000.

Although bankruptcies and IVAs are slightly down on last quarters totals, both have risen considerably compared to 2008 figures. I expect these levels to rise over the course of the next few months as many people find their financial limits stretched to the maximum, particularly over the busy Christmas period.