The North East and South West of England have more cases of personal insolvency than anywhere else in the UK, says debt management company IVA-Advice.co. Figures from the Insolvency Service has shown that the North East and South West show the highest numbers of individuals with debt problems across England and Wales. Of the 102,018 cases of insolvency in 2012, there were 33.3 and 29.3 cases per 10,000 adults respectively in these two regions. Local Authority Torbay in Devon has the highest levels of personal insolvency of 53.8 cases in 10,000 people while London, which has the lowest levels of all the regions in the UK, has just 9.9. However the number of individuals granted insolvency to tackle their debt problems within England and Wales has dropped by 18% since 2010. In fact those being made bankrupt has decreased from 7.1 in 10,000 people in 2012 from a peak of 17.2 in 2009.
Keith Algie of Chartered Accountants and Business Advisers Baker Tilly believes there are several reasons why the insolvency rates could have fallen during 2012. “The reduction in the number of formal insolvencies is indicative of the low interest rates which have enabled debtors to service historic debt levels. In addition, debts have become more consumer aware and shop around for advice rather than taking the formal insolvency rule as the first step. “However, with redundancy levels at the rate of 1,534 a day on average, inflation continuing to outstrip wage growth, the emergence of payday loan companies as short-term lenders of last resort, and the possibility of interest rate rises in the mid-term, many people may be storing up problems for the future.”
However these figures do not reflect an accurate picture of the financial state of the households in England and Wales. Many people burdened with debt chose to enter into less formal arrangements than insolvency, such as a debt management plan or apply for a court administration order to delay court action by creditors and gain more time to pay.
Steve Rees, managing director of debt management firm Vincent Bond & Co, said: “While it is great news that the total number of insolvencies the past year has fallen, it is important to remember that these numbers do not include informal debt plans. “The past year has shown a reduction in the amount of personal insolvencies, but personal debts still remain high. It is my continuing belief that the reason insolvencies are down is that people are have chosen to service their debts rather than reducing them. The debt cycle can be a recurring trap that unfortunately many will experience over and over again. Individuals need to watch they stay out of their own personal red zone.”
A spokesperson for debt management company IVA adviser, said: “Insolvencies seem to be decreasing slowly as time passes, which is giving rise to speculation that the recession must be coming to an end. However, the figures being quoted by the Insolvency Service do not take into account the aftermath of the Christmas and New Year. Traditionally, problems from overspending at Christmas tend to be seen in March and April time, with people defaulting on their credit card bills and loan payments or slipping into unauthorized overdrafts that charges, interests and fees prompt a debt spiral.”
“It can take a few months to see the full effects of the festive season emerge.”