Personal insolvency figures have increased for the first time in a year, according to The Insolvency Service.
In the three months to the end of September, 19,683 people across England and Wales were declared insolvent.
While the number of people entering insolvency solutions decreased 18.5% from the same quarter last year, it increased 2.8% from the previous quarter this year.
The increase has been driven by individual voluntary arrangements (IVAs), which was the only insolvency debt solution to increase.
The insolvency figures produced by The Insolvency Service show:
- Bankruptcy: 3,857 people entered bankruptcy in the third quarter of 2015, down from 3,987 in Q2 and is the lowest figures for 25 years.
- Individual Voluntary Arrangement (IVA): 10,197 people entered an IVA, this was up from 9,333 in the previous quarter.
- Debt Relief Orders: 5,629 people entered a DRO, down from 5,832 in Q2.
Reason for Bankruptcy Decrease
As unemployment figures decrease it's likely the number of people entering bankruptcy will also fall. If someone has a disposable income they may be more suitable for an IVA, or an informal debt solution, allowing them to repay their debt in an affordable solution.
This would also explain the rise in the number of people entering an IVA, however it could be the figures averaging out over the year.
Stuart Carmichael of Debt Support Trust said:
"While it's positive bankruptcy figures are down, it is concerning that overall insolvency figures have increased. The number of insolvency cases were declining recently and this could be a sign figures are levelling out.
It's important people seek debt advice before proceeding to enter a debt solution."
In October there were changes to the traditional bankruptcy debt solution which meant creditors can only apply to make someone bankrupt if they owe £5,000 or more, up from £750.
This is likely to further decrease the number of people entering bankruptcy, as creditor applications may also fall.