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Bankruptcy highest since records began

Monday 8th February 2010

By Mike Jones

Figures released by the Government’s Insolvency Service revealed that levels of personal insolvency in the UK have increased for the eighth consecutive quarter and are at the highest level since records began.

This year 134,142 people entered into personal insolvency which is in line with many forecasts and shows that as the UK economy comes out of recession, the UK consumer continues to struggle with personal debt and will do for some time yet.

The figures show that 17,007 individuals were made bankrupt this quarter, 13,219 entered into Individual Voluntary Arrangements (‘IVA’) and 5,348 Debt Relief Orders ('DRO'). This totals 35,574 personal insolvencies in Q4 of 2009, which is a 24.9% increase on the same quarter of 2008.

Pat Boyden, partner and personal insolvency expert at PricewaterhouseCoopers LLP, said: "The huge numbers of people entering insolvency demonstrates the real effect the recession is having on the average person in the UK. However, the one chink of light in this worrying story is that more of those people entering insolvency are entering into IVAs as opposed to straight bankruptcy, meaning they are seeking ways of settling their debts.

"These numbers are an inevitable consequence of the financial problems the UK has experienced since 2008. It is still very much a consumer issue as the numbers of self-employed bankruptcies fell in these latest figures.

"Since their introduction last April, Debt Relief Orders have continued to be a popular means of dealing with smaller levels of personal debt. This is very much in line with expectations and we expect this trend to continue throughout the year."

Facts from a recent consumer debt report from PwC:

* Total household borrowing currently stands at £1.5trillion;
* Unsecured borrowing remained broadly constant over the past 12 months at around £230billion (in stark contrast to the 6% growth seen in 2008);
* Average household debt stands at £60,000 per house made up of £50,000 in secured debt and £10,000 in unsecured debt;
* The average household will need to spend approximately 15% of net income just to service interest payments arising from this debt.

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