Personal insolvencies have increased for the first time in a year as more people struggle with unmanageable debt, official figures show.
There were 28,062 individual insolvencies across England and Wales, showing a 2.5% increase on the previous quarter, although the figure is still 7.2% lower than the same period a year ago, the Insolvency Service said.
Within this, there was a big increase in the number of individual voluntary arrangements (IVAs) on the previous quarter, while bankruptcies continued to fall and are at their lowest level since 2003.
Bankruptcies are a fifth lower than they were a year ago, with 7,617 orders made. The Insolvency Service said that one of the reasons for the decline is the increasing use of debt relief orders (DROs), which were introduced three years ago and have overtaken bankruptcies for the first time in these latest figures.
There were 7,777 DROs in the third quarter of this year, showing a slight decline on the previous quarter but a 2.3% rise on a year ago. DROs are often dubbed "bankruptcy light" and are aimed at people who have more modest levels of debt but no realistic prospect of paying it off.
IVAs were the only type of personal insolvency to show an increase on the previous quarter, with a large 11.9% rise to reach 12,668. Bankruptcy numbers have been lower than IVAs for a year and a half. IVAs are agreements between people and their creditors that they should pay their debts to a specialist, who then shares the money out between creditors as agreed.
Joanna Elson, chief executive of charity the Money Advice Trust, said: "Our experience tells us that the falling bankruptcy figures are not a result of improved household finances, but rather of the increased cost of going bankrupt."
The country recently saw an end to the longest double-dip recession since 1950, but experts have warned that insolvency figures often come to a peak after a recession has finished, due to the time-lag as people try to struggle on.
Household finances are set to come under renewed pressure this winter, with a string of major energy companies announcing price hikes in recent weeks and food and some mortgage costs on the rise.
Ms Elson warned that the figures are likely to worsen in the coming months. She said: "The hard reality remains that it takes up more and more of our income to put food on the table, travel to work, and heat our homes. This means many households are running a budget deficit of their very own, and some are relying on credit to bridge the gap."