Personal insolvencies at lowest level since 2005

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The number of people becoming insolvent in England and Wales has fallen to its lowest level in nearly a decade.

According to the Insolvency Service, 20,826 individuals became insolvent in the first three months of 2015.

That is the lowest figure since the autumn of 2005, and a fall of 18.6% on the number a year ago - one of the steepest declines on record.

Individual Voluntary Arrangements (IVAs), the most-used form of insolvency arrangement, fell by 23.5%.

Figures released in Scotland earlier this month showed a similar trend.

Debt charity StepChange welcomed the news that personal insolvencies had fallen, but warned that dangers still remained.

"With levels of personal borrowing growing rapidly once again, the next government and lenders must ensure that the mistakes of the pre-crisis credit boom are not repeated," said Peter Tutton, head of policy at StepChange.

"Our concern is that growing levels of consumer credit will be followed by growing numbers of people falling into problem debt."

Bankruptcy and alternatives

Bankruptcy: The traditional way of escaping overwhelming debt. Ends after one year, but you are likely to lose all your assets, including your house, to pay something to the creditors

Individual Voluntary Arrangement (IVA): A deal between you and your creditors, overseen by an insolvency practitioner. Less stigma, less chance of losing your home, but involves paying some of your debts in one go

Debt Relief Orders: Introduced in April 2009, these allow people with debts of less than £15,000 (£20,000 from October 2015) and minimal assets to write off debts without a full-blown bankruptcy

Experts say one reason for the fall in insolvencies now is the big decline in borrowing in 2008, during the financial crisis. As a result, fewer people are in financial difficulty seven years later.

"As well as this, we are seeing lower levels of personal debt, and less people borrowing outside of their means due to more stringent affordability checks by creditors," said Mark Sands, personal insolvency partner at Baker Tilly.

The number of companies becoming insolvent also fell.

In the first three months of 2015, 4,052 companies went bust, a drop of 11.3% on the same quarter last year and the lowest figure since the autumn of 2007.

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