Drop in bankruptcies 'set to halt'

Worried looking woman A year-long decline in the number of people declared bankrupt is expected to end on Friday as fears grow over the impact of Britain's return to recession.

The latest Insolvency Service figures for the first quarter of the year are likely to show a rise in bankruptcies, said the Insolvency Practitioners Association (IPA).
The number of bankruptcies is predicted to be around 9,500, which would put it below the 12,539 recorded in the first three months of last year, a figure which dropped to 8,626 in the final quarter of 2011, the lowest level since spring 2004.

Continued low interest rates meant bankruptcies fell sharply last year, dropping by almost a third in 2011 on a year earlier and hitting their lowest levels since 2004. However, with unemployment rising and banks tightening their lending criteria there are fears the recent improved trend is about to end.

Charles Turner, vice president of the IPA, said he expected to see around 9,500 bankruptcies in Friday's figures.

He said: "It is likely that the drop in bankruptcy numbers which we saw last year will have come to a halt and bankruptcies will again be on the increase. The figures are unlikely however to have reached the levels they were this time last year."

The total number of personal insolvencies, which includes bankruptcies, debt relief orders (DROs) and individual voluntary arrangements (IVAs), dropped to its lowest level since 2008 last year. There were 28,973 individual insolvencies in England and Wales in the fourth quarter of 2011, a 4% drop on the previous quarter, said the Insolvency Service.

Despite the overall fall, the number of DROs rose strongly over 2011, with a 15% increase compared with 2010. Around one in four people taking out a DRO is aged between 25 and 34. Dubbed "bankruptcy light" by some, they are a formal process aimed at people who have more modest levels of debt but no realistic prospect of paying it off.

Mr Turner said: "Debt relief orders, an alternative form of bankruptcy for those who owe less than £15,000, appear to be on the increase - a trend linked to the continued squeeze on household budgets from items such as rising fuel costs."

Nick Reed, a director at PricewaterhouseCoopers (PwC), said he was not expecting to see much change in the personal insolvency figures. He said: "The same issues have been behind the numbers for the last two quarters - people tightening their belts, the lack of credit and the general economic situation point to tough times ahead still."
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