The number of people who slipped into personal insolvency in 2014 was at its lowest level in nine years, official figures show.
Some 99,196 individual insolvencies were recorded last year, marking the first time that the annual total has dipped below 100,000 since 2005, according to data from the Insolvency Service.
But a Kirklees insolvency expert said the “explosion” of personal debt before the recession meant the new level was still far higher than it was at the turn of the 21st century.
The latest annual total, which is made up of bankruptcies, debt relief orders (DROs) and individual voluntary arrangements (IVAs), also represents a 1.8% fall on the number of personal insolvencies recorded in 2013.
Bankruptcies last year were at their lowest annual level since 1998 while the number of IVAs taken out was the highest since their introduction in 1987.
There were a total of 20,318 bankruptcy orders in 2014, marking a 17% fall on the number in 2013. Bankruptcies tend to be seen as a “last resort” and their decline has been hastened by the introduction of DROs in 2009. DROs are often dubbed “bankruptcy light” as they are aimed at people with lower amounts of debt but no realistic prospect of paying it off.
There were 26,688 DROs recorded in 2014 –3% down on 2013 and the lowest annual total seen since 2010.
Meanwhile, 52,190 IVAs were taken out last year, meaning they made up 53% of all personal insolvencies last year compared with less than a third in 2005.
IVAs involve an agreement whereby the debtor repays creditors some or all of what they are owed. The number of IVAs taken out last year rose by 7% against 2013, marking the second year-on-year increase in a row.
Chris Wood, Yorkshire committee member for insolvency trade body R3 and a partner at Clough Corporate Solutions in Cleckheaton, said DROs and IVAs were now fthe dominant form of personal insolvency.
He said: “Personal insolvencies will probably hover around the 100,000 a year mark, although it should be remembered that this is only part of the picture as this figure does not include debt management plans.
“The explosion of personal debt before the financial crisis means that this ‘new normal’ level of insolvencies is far higher than it was at the turn of the century.”
Said Mr Wood: “The last quarter of the year tends to be quieter for new insolvencies. With Christmas festivities approaching, many people with debt problems put off making decisions or taking action until the New Year.”
“Although falling inflation has eased pressure on household finances, the fall could be partially the result of deep-seated consumer debt problems.
“Inflation’s falling because people aren’t spending and one reason people aren’t spending is because there’s still a lot of burdensome consumer debt out there. People expect that interest rates will inevitably rise and, rather than going out and continuing to spend, may be trying to pay down as much debt as they can ahead of that time.”