Recent figures on personal insolvency may only be showing the tip of the iceberg, it has been warned.
Giles Frampton, vice-president of R3, spoke after the Insolvency Service revealed that 101,049 individuals were declared bankrupt in England and Wales in 2013. This is down 7.9% on the 2012 figure, but Mr Frampton is worried that many people will have struggled in the first two months of this year having “done their best” over the festive period.
“It will be interesting to see how these figures change in the first quarter of 2014,” he commented.
People often overspend during Christmas and new year, and many started 2014 with a “debt hangover”, having failed to consider how they were going to deal with the additional debt.
There have been at least 100,000 new cases of personal insolvency each year since 2006, Mr Frampton added, and levels are “astronomically high compared to recent decades”.
The figures show that many people go into debt in order to get by, but there are signs that the UK is becoming more financially responsible.
The most popular debt relief tactic is an Individual Voluntary Arrangement, with 12,333 taken out in the fourth quarter of last year, accounting for nearly half of all insolvencies.
A rise in the use of IVAs is “symptomatic of people struggling with the rising cost of living”, Mr Frampton explained, as the measure is often associated with a “slow build-up of debt”.
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