Bankruptcies fall to lowest for 25 years, but concerns remain
The number of bankruptcies fell to a 25-year low in 2015; however, celebrations may have to be put on hold amidst warnings about the future as debt levels reach the highest levels seen for years.
The latest figures show that fewer British people declared themselves bankrupt or insolvent during 2015 than since the middle of the ‘noughties’, but there could be shocks in store.
Ten-year low for insolvencies
A little under 80,000 people in Wales and England were declared insolvent in 2015, marking a 19 per cent drop compared with 2014 and leaving figures at a ten-year low. Insolvency is reached when a person finds themselves unable to pay their debts, at which stage bankruptcy may become a serious consideration.
The Insolvency Service claims that this fall has been driven by less individuals taking on an individual voluntary arrangement (IVA). These numbers saw a fall of 23 per cent to reach a level just below 40,000.
The number of bankruptcies, meanwhile, fell to 15,797, which is the lowest level for quarter of a century. The number of businesses that went under also reached the lowest level for 16 years, according to Insolvency Service data, with 14,629 companies affected.
Low interest levels and high debt
Six years of very low interest rates are believed to have helped to ease debt pressures, but experts are troubled by the effects of a future rise in borrowing costs.
Household debt is now at the highest level seen for four years, while real earnings rose by only 0.7 per cent in the 11 months from the start of last year until November 2015. Debt measured as a percentage in relation to net household income is now at more than 55 per cent.
With experts predicting that real earning increases may even fall into the negative during 2016, the outlook looks far from rosy. For this reason, the future could well see another rise in the number of people needing debt help from specialist companies and services; for example, Carringtondean help with debt advice.
Many experts believe that debt levels are being driven up by disposable income pressures and that people may be being lured into a false sense of security as a result of the idea of easy borrowing and low interest rates.