Rise in bankruptcies sparks warning
The number of people declared bankrupt rose on Friday for the first time in a year, prompting predictions that insolvency rates are set to worsen.
Bankruptcies rose by 5.5% on the previous quarter to reach 9,132, ending a recent trend of quarterly improvements, Insolvency Service figures showed.
The number of debt relief orders (DROs), another form of personal insolvency often dubbed "bankruptcy light", increased by 7.3% on the quarter to reach a record high of 7,897.
However, the overall number of personal insolvencies declined by 1.2% in the first three months of this year compared with the previous quarter, due to a sharp 10.4% drop in individual voluntary arrangements (IVAs), of which there were 11,694.
There were 28,723 personal insolvencies in England and Wales in the first quarter of 2012, a 4.7% drop on the same period a year ago. Analysts warned that the official figures are the tip of the iceberg and do not reflect the scale of those struggling amid the recession.
Debt charity the Consumer Credit Counselling Service (CCCS) said it expects personal insolvencies to rise over the next year due to factors including high inflation, redundancy and welfare benefit changes, and warned that six million households are living on the edge.
Delroy Corinaldi, director of external affairs at the CCCS, said: "It is crucial that anyone who is struggling to repay their debts, or even worried about their debts, should seek free advice and support."
The number of companies in England and Wales which had receivers or administrators in the first three months of the year rose by 1,290 (10%) on the previous quarter. Meanwhile, there were 4,303 company liquidations in the first quarter of 2012, a 0.2% increase on the previous quarter and a 4.3% rise on the same period a year ago.
Louise Brittain, a partner in Deloitte's contentious insolvency team, warned that the figures do not reflect the "crippling financial difficulty" being felt by households.
She said small business owners were likely to have formed a significant part of the bankruptcy increases, as they will have had greater difficulty trying to obtain credit in the tough economic environment.