Figures reveal small drop in insolvencies

Government figures due today were expected to show a small decline in the number of people declared insolvent during the second quarter.

It is thought there were around 3% fewer personal insolvencies during the three months to June 30, according to expert Mark Sands of RSM Tenon.

But he warned any drop was likely to be only a temporary reprieve as Government spending cuts threatened to force many more people into insolvency.

He was pencilling in more than 140,000 insolvencies in total this year - another record high.

The last set of figures from the Insolvency Service showed around 35,682 people went insolvent during the period as consumers struggled to keep up with their debts - a figure expected to drop to between 34,000 and 35,000.

It is thought today's numbers will show sharply lower numbers of bankruptcies as more people instead took out individual voluntary arrangements (IVAs), under which interest on debt is frozen in exchange for a set amount being repaid each month.

There are also set to have been more cases of debt relief orders (DROs), which offer an alternative to bankruptcy for people with debts of less than £15,000, assets of less than £300 and less than £50 surplus income a month.

Mr Sands, head of bankruptcy at RSM Tenon, said the rise in DROs and IVAs would mean any drop in the number of bankruptcies was therefore a "red herring".

He added the spending cuts would heap further pressure on those struggling with debts.

"It's not only a total loss of income that forces people down the insolvency route, it's any reduction in income," he said

"The mooted movements of the public sector workforce to the private sector could lead to a period of unemployment and even a pay cut leaving them unable to cover their monthly outgoings."

The Insolvency Service figures will also give details on the number of businesses going into administration during the second quarter.

There were hopes the trends seen in the first quarter would continue after total company liquidations fell by 4% quarter-on-quarter in the opening three months of the year.