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Personal insolvency decreases
“It can only be an encouraging sign that personal insolvency has decreased, but this is likely to come as a surprise for many, given the current economic uncertainty. These figures indicate the peak in personal insolvency occurred in early 2010 but it would be unwise to rule out further increases to come. Interestingly IVA and DRO numbers have increased slightly, as alternatives to bankruptcy.
“These figures do not give us the full picture as the vastly growing Debt Management Plan market (estimated at 500,000 individuals) is not counted, nor do statistics indicate the number of individuals struggling without help.
“If inflation continues to rise and wages remain stagnant we may see a rise in personal insolvencies. Higher energy prices are likely to bite in the coming months as households receive their first bill since the recent hike. As always, Christmas spending will also be another crunch time for households.”
Corporate Insolvency stays level
“A flattening in corporate insolvency comes after the latest 0.5% growth figures, however, indications suggest that it will be a slow, sluggish recovery that is likely to take between three and five years, and these insolvency figures are still higher than twelve months ago.
“Insolvency numbers remain historically low compared to the levels seen after previous recessions, this is largely a result of the value of business assets currently too low for creditors to pursue – they simply will not cover the debts they are owed. Consequently businesses are being allowed to stay afloat albeit as a ‘zombie’ enterprises. When the economy begins to enjoy a period of sustained growth we are likely to see creditors being more aggressive in their pursuit of debtors.”
“R3’s Business Distress Index revealed over four in ten businesses (43%) are experiencing decreased profits. While current stresses may not be enough to push businesses over the edge, a prolonged period of distress will trigger an increase in formal insolvencies. The first few years after a recession are traditionally difficult as it will take some time for businesses to sufficiently rebuild their reserves to support expansion.”
"This is the ultimate statement of where the law on IVAs is to be found in our great common law...