The number of personal insolvencies in England and Wales grew by 13 per cent last year due to a growing amount of unmanageable debts, according to the Insolvency Service’s latest figures.
In fact more than 90,900 people in England and Wales found themselves becoming insolvent in 2016.
The increase in insolvencies in 2016, when compared to the previous year, was primarily the result of Individual Voluntary Arrangements (IVA), which allows an individual to repay creditors over a period of five years. However, the numbers, although rising, remain well below the peak level of insolvencies reached in 2010.
The number of bankruptcies increased last year as well, with the last quarter seeing a seven per cent increase.
This growth in the number of bankruptcies is believed to be the result of a new system introduced in England and Wales in April 2016, which allows bankruptcy applications to be made online, without the need to go to court. The shift from court to internet applications was designed to eliminate any stigma associated with having to attend official proceedings.
Shortly after the figures were released, Mark Carney, the Governor of the Bank of England warned that “vigilance” was needed over rising levels of debt and that there had been a “shift” in the levels of personal unsecured borrowing, which is rising at its fastest rate for a decade.
Consumer borrowing in particular rose at its fastest pace in 11 years during 2016, according to recent Bank of England figures, which support the Governor’s claims.
The latest Bank report also shows that the amount of outstanding personal debt, excluding mortgages, hit £192 billion at the end of last year – the highest level since December 2008.
The average household in the UK is now believed to owe a record amount of £12,887, excluding mortgages, and with inflation growing due to a weakened pound there are growing concerns about the levels of unmanaged debt in the country.