Bankruptcies down

Fewer people went bankrupt last year, leaving the total number of personal insolvencies at its lowest since 2005.

There were 99,196 individual insolvencies in 2014, down 1.8% on the year before, including bankruptcies, debt relief orders and Individual Voluntary Arrangements or IVAs.

Bankruptcies were sharply down, by 17%, while IVAs rose slightly.

Insolvency experts say the economic recovery has helped and creditors have been more willing to enter into informal repayment agreements with people in financial difficulty.

Here are the stats.

Surge in Debt relief Orders

The Insolvency Service has reported a sharp rise in the number of people seeking Debt Relief Orders, a cheap form of bankruptcy for people with few assets. They reached a record level of 7,600 in the three months to September.

Debt Relief Orders or DROs were brought in two years ago to provide a route out of debt for the poorest people in financial trouble.

The process costs just £90, much cheaper for the debtor than bankruptcy, and is only open to those with less than £300 in assets as well as a low value car.

While bankruptcies have fallen sharply as families batten down the hatches and cut spending, the numbers at the bottom of the pile seeking protection from creditors is on the rise.

Mark Sands, from insolvency experts, RSM Tenon, said, "It shows how many people are so desperately short of money that they qualify for DROs."

The total figure for individual insolvencies was down 11 per cent compared with the thrid quarter of 2010.

But with financial pressures building, the Consumer Credit Counselling Service (CCCS) fears there will be a surge in insolvencies next year.

Debt Relief Order - what's that?

6,788 people found out in the first three months of this year.

That's up from 6,172 in the quarter before and sharply higher than 5,644 a year ago.

Debt Relief Orders, or DROs, are on the rise and the numbers are likely to climb further.

The Orders are a sort of bankruptcy-lite, simpler and designed for people with burdensome debts but limited assets.

I explained in a previous note why the arrival of DROs is significant, but one obvious advantage is that they are a cheap way to make a new start.

A DRO costs £90, while going bankrupt is £625, rising soon to £700.

Bankrupts end up paying even more than that out of their assets, if there's enough after everything is sold off.

So, while DROs are on the rise, bankruptcies are going down, the Insolvency Service tells us, though many predict an overall rise in individual insolvencies later this year.

If you want to find out more about Debt Relief Orders, here's a good place to start.