Insolvency numbers fall despite credit crunch
The number of personal insolvencies has fallen despite the ongoing credit crunch, the Insolvency Service (IVS) has revealed.
The number of people filing for insolvency dropped to 24,553 over the past year, some 8.3% less than at the same period in 2007. Within this total there were falls in the number of people going bankrupt and the number of people taking out Individual Voluntary Arrangements (IVAs).
The Insolvency Service attributes the fall partly to the credit crunch making people more aware of their debts and banks refusing to lend credit so easily. "The fall in number of people going insolvent is certainly one piece of good news amidst the current doom and gloom credit crunch headlines," said an IVS spokesperson.
However, companies are faring less well in the tougher market conditions. According to the IVS company liquidations increased by 11.6% in the first quarter of the year to 3,560, some 15% higher than in the same period last year.
"But the company liquidation annual figures are still only half the levels seen in the 1990s, so it will take at least another quarter to put the drop down to the credit crunch," says the spokesperson.
On the other hand, figures from TDX Group, which supplies debt collection information to banks, contradicts the IVS findings. It recently revealed that 17% more homeowners have applied for insolvency during the second quarter of this year compared to last.
Generally speaking, insolvency is to businesses what bankruptcy is to individuals. A company is insolvent if the value of its assets is less than the amount of its liabilities, or it is unable to pay its liabilities (loan payments) as they fall due. It’s an offence for an insolvent company to keep trading, so the main options available to an insolvent company are: voluntary liquidation, compulsory liquidation, administration or a company voluntary arrangement.