Personal insolvency figures are predicted to fall further tomorrow, but experts warned the recent improving trend is likely to hit a turning point soon, with large numbers of people still living on the brink.
Charles Turner, vice-president of the Insolvency Practitioners Association (IPA), expects personal insolvencies to fall further from the four-year low set in the second quarter of this year to around 26,600 in official figures for the third quarter published tomorrow.
Within this total, Mr Turner said there were likely to be around 8,000 bankruptcies, which would be a similar level to the 8,088 orders made in the previous quarter, which was the lowest figure since 2003.
The country recently saw an end to the longest double-dip recession since 1950, while inflation also eased to its lowest level for nearly three years in September.
But household finances are set to come under renewed pressure this winter, with a string of major energy companies announcing price hikes in recent weeks and food and some mortgage costs on the rise.
Mr Turner warned that there tends to be a time lag before the full impact of a recession shows up in the number of people whose finances have gone under, meaning insolvency figures often come to a peak after a recession has finished.
He said: “There are a large number of people with debt management plans which do not show up in these quarterly figures.
“Anecdotally, the numbers are increasing and a lot of people facing insolvency are not apparent in the official statistics.
“I do think we will start to see the official statistics start to climb again before too long.”
Personal insolvencies, which include bankruptcies, debt relief orders (DROs) and individual voluntary arrangements (IVAs) dropped to 27,390 across England and Wales in the second quarter of this year, figures published by the Insolvency Service showed previously.
Continued low interest rates have helped to keep the figures down, but debt charity the Consumer Credit Counselling Service (CCCS) estimates that around six million households are living on the edge. It recently reported a sharp rise in people struggling with payday loans they cannot afford.
Financial services firm RSM Tenon expects personal insolvencies will fall even lower than Mr Turner’s predictions, to around 25,600.
But Mark Sands, RSM Tenon’s head of personal insolvency, said many people could still be trying to ignore their debt problems.
He said: “This could mean we find that levels of personal insolvencies could actually explode in the next few years when people reach the point when they just cannot go on and have to face their spiralling debts and the inevitable interest rates rises.”
Mr Turner said the number of debt relief orders (DROs) is likely to have declined to around 7,800, from the all-time high of 7,956 seen in the second quarter of this year.
DROs were introduced in 2009 and are often dubbed “bankruptcy light”. They are aimed at people who have more modest levels of debt but no realistic prospect of paying it off.
He also expects the number of IVAs to show a drop, to around 10,800, from 11,346 the previous quarter. IVAs are agreements between people and their creditors that they should pay their debts to an authorised debt specialist who then shares the money out between creditors as agreed.
