2015 personal insolvencies 'expected to be at lowest level in a decade'

The number of people whose financial situation was so bad that they became insolvent in 2015 is expected to be at its lowest levels in a decade in official figures released on Friday.

Creditor services firm RSM predicts that across England and Wales, the Insolvency Service's figures will show there were around 80,000 personal insolvencies last year.

This compares with just over 99,000 personal insolvencies recorded in 2014 - when the annual total dipped below the 100,000 mark for the first time in nine years.

The predicted 2015 figure would be the lowest annual total since 2005, when there were 67,584 personal insolvencies.

Rock-bottom interest rates have been helping to keep the cost of people's borrowing down, although there has been speculation that rates could start to increase in 2016 as the economy recovers.

The official personal insolvency figures are made up of three types of insolvency. These are bankruptcies, which tend to be seen as a last resort; debt relief orders (DROs), which are often dubbed "bankruptcy light" and are aimed at people with smaller amounts of debt but no realistic prospect of paying it off; and individual voluntary arrangements (IVAs), which are agreements where money is shared out between creditors.

They do not cover arrangements such as debt management plans, so not everyone who is struggling with debt is included in the figures.

Bankruptcy numbers have been on a downward path in recent years, helped by the introduction of DROs as an alternative.

Changes made to DROs in October mean that people with up to £20,000-worth of debt now have a DRO as an option. The previous debt limit for people entering a DRO was £15,000.

The Insolvency Service is due to release its figures for the fourth quarter of 2015. Figures it has released so far show that in the first three-quarters of 2015 there were 59,588 personal insolvencies recorded.

RSM's "tracker service" suggests there will have been around 20,000 more personal insolvencies in England and Wales in the final quarter of 2015, bringing the total for the year to around 80,000.

It predicts the steady decline in personal insolvencies will continue into 2016, with around 70,000 to 75,000 cases this year.

Mark Sands, a personal insolvency partner at RSM and president of the Insolvency Practitioners Association (IPA), said: "DROs are expected to show a one-off increase as a result of the changes made on October 1 2015 - consumers with up to £20,000 of debt are now eligible for this light-touch solution, compared to £15,000 before.

"Bankruptcies are expected to continue their gradual long-term decline as the economy continues to grow."