The number of people going bankrupt has fallen to its lowest quarterly level since before the turn of the century.
Low interest rates making it easier for people to deal with their debts could partly explain the figures. Meanwhile, debt relief orders (DROs) – an alternative to bankruptcy – are proving popular with people who owe less than £15,000.
According to the Insolvency Service:
- 24,837 people in England and Wales became insolvent during the third quarter of the year – a fall of 4.6% on the same period in 2013.
- there were 4,886 bankruptcy orders between July and September – a fall of 18.7% on last year and the lowest level since the start of 1999.
“Bankruptcies have fallen to a 15-year low as consumers have taken advantage of record low interest rates to pay down problem debt, or chosen to apply for DROs in circumstances where they owe less than £15,000,” said Mark Sands, personal insolvency partner at Baker Tilly.
“We’ve also seen an increase in popularity for individual voluntary arrangements so far this year, suggesting an improved confidence among debtors that they can commit to a five-year repayment plan.”
But there are fears that the situation could worsen again.
Mr Sands said: “Despite previous indications from the Bank of England that rates would rise this year, many pundits are now predicting that we won’t see a rise before next summer.
“While these current conditions are helping those who want to pay down debt, they could also be encouraging others to take on more than they can afford. The latest statistics from the British Bankers Association show a rise in demand for unsecured personal loans, credit card and overdraft facilities.
“Those who are tempted to over-extend themselves, and the many carrying a debt burden taken on before the credit crunch, face a potential shock when rates eventually do start to climb.”