Latest DTI insolvency figures released at 9.30am today (4 May 2007) show insolvencies topped 30,000 in the first quarter of 2007.

Key Stats

1. The total number of individual insolvencies for the year to date (Q2 2006 – Q1 2007) is 113,089, an increase of 44.3% over the previous full year (Q2 2005 – Q1 2006), 78,391.

2. The total number of IVAs for the year to date (Q2 2006 – Q1 2007) is 48,601, an increase of 46.6% the previous full year (Q2 2005 – Q1 2006), 25,965.

3. The latest quarter shows an overall increase in individual insolvencies of 1.2% over the previous quarter and 23.9% on the same quarter last year.

4. IVAs, in particular, rose by 4.7% and 47.6% respectively.

5. Individual bankruptcies fell by 1.3% since the last quarter, but rose 10.0% on the same quarter last year.

6. For Q1 2007, IVAs represented 44.0% of total individual insolvencies, compared to 36.9% for the same quarter a year ago.

7. Bankruptcies represented 56.0% of total individual insolvencies, compared to 63.1% for the same quarter a year ago.

Number of Insolvencies in England and Wales (seasonally adjusted)

p = provisional, r = revised

James Falla, MD of Thomas Charles, said of the latest stats:

“Total insolvencies this quarter crept over 30,000 by a whisker and this is indeed a milestone. However, considering Q1 is usually the busiest quarter of the year, and Q4 the quietest, an increase of just 1.2% on the previous quarter is lower than expected, especially when compared to the 17.4% increase we saw between Q4 and Q1 last year. It therefore seems that personal insolvencies are slowing down significantly compared with the rapid growth we saw last year.

IVA growth has undoubtedly been slowed by a harder line stance taken by some creditors such as Northern Rock and MBNA. Without this, it is likely that we would have seen insolvencies, and IVAs in particular, continue to rise apace.

With the slowing of IVAs, we might have expected to see a rise in bankruptcies. Those being refused IVAs will normally seriously consider the only other formal insolvency route available to deal with their debts. However, bankruptcies have fallen for the first time since Q2 2006. With property prices rising to heights never seen before, the housing market may be playing part in this. Since bankruptcy usually means losing your home, debtors may fear that they will never get back on the property ladder again if they go bankrupt in the current climate.

The figures would therefore suggest that more people are being placed on Debt Management Plans, an informal agreement with creditors to reduce the amount paid each month so that the payments fit within an affordable monthly budget. Unfortunately, Debt Management plans will generally not resolve a debt problem in the short term, rather prolonging the problem far into the future. As such, we are in danger of seeing a false picture of improvement where problems are not being solved, but rather being left to fester.

If we are to tackle the debt situation in Britain effectively, I would argue that we need to educate people about money management at a young age. Introducing elements to the curriculum which help young people understand the financial world that they are going to get themselves into, and talking to them about credit cards, loans and so on could really make a difference into the future."

Thursday’s press release from Thomas Charles (www.thomascharles.com), detailed the results of their latest quarterly insolvency research showing an increase in the proportion of indebted Britons struggling to meet repayments and a correlation between age and insolvency. Click here to view the release.

About Thomas Charles & Co Ltd

Thomas Charles & Co Ltd was set up in 2004. The Joint Managing Director, James Falla has 7 years experience in the insolvency and debt management industry and was involved in the set up of debt help specialists, Brookvale Group PLC, listed on OFEX since 2001.

Thomas Charles operates throughout England and Wales with its head office in Acton (West London). It has a personal, consultative approach to debt management. It focuses primarily on providing formal solutions for debt problems including Individual Voluntary Arrangement and Bankruptcy. However, it will also provide advice around informal debt repayment plans where appropriate. It works with third party Insolvency Practitioners around the UK.

About James Falla

James Falla has advised people who have personal debt problems since 1997. During this period he has helped 1000s of people through the IVA process and worked with many others who have decided to undertake both Bankruptcy and informal Debt Management Plans.