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Bankruptcy at lowest level since start of financial crisis
The rate of personal insolvency, where individuals are declared bankrupt or taking other legal measures to deal with their debts, has fallen to its lowest level since the start of the financial crisis.

Statistics published today by RSM Tenon, a firm of accountants and business consultants, suggest around 25,000 desperate borrowers resorted to personal insolvency in the first three months of 2013, the lowest level since early 2008 and a 16 per cent drop on a year earlier.

The company's Tracker report, which it calls an "early warning system", is published a day ahead of official figures from the Insolvency Service, part of the Department for Business, Innovation and Skills.

Full bankruptcies were down by 25 per cent to 6,850, while Individual Voluntary Arrangements (IVA), a watered down version, fell by 11 per cent.

The company said the real "surprise result" was an 8 per cent fall to 7,266 in Debt Relief Orders.

DROs are a lower-cost alternative to bankruptcy for people with debts of less than £15,000 and a monthly disposable income of less than £50. People can apply through an intermediary rather than going to court and pay a £90 fee, which can be paid in instalments.

Mark Sands, head of personal insolvency at RSM Tenon, said “The economy narrowly avoided a triple dip recession and the good news is that in the same quarter that the economy grew by 0.3 per cent personal insolvencies have fallen to their lowest level since early 2008.

"Record low interest rates have helped homeowners, a low level of new credit has avoided some of the over borrowing of the past and, despite many people feeling the pain of the downturn and the austerity measures, unemployment has not reached record levels and so more people than in previous recessions have been able to muddle through.

"The picture isn’t as rosy as the figures suggest, for many who have remained in employment even if they have permanent jobs. Rising costs, frozen salaries and wage cuts can still have an impact on family finances especially if they were in debt before the credit crunch.”

Debt management plans are informal arrangements made with creditors, usually via a third party which can take a hefty cut. It doesn't fall under the aegis of the Insolvency Act.

IVAs a watered down version of bankruptcy which usually require the individual to pay creditors over five years. It is effectively a debt management plan but requires three-quarters of the creditors to agree to it. The rest must abide by the terms of the plan.

Mr Sands added: "This shows that people are less confident about their long-term employment prospects. As over indebted consumers still cannot see any certainty in their monthly household budgets, I expect to see peaks and troughs throughout 2013.

"Also, if people with serious debt problems are mis-sold debt management plans, a less regulated alternative, IVAs will continue to fall. Nevertheless I forecast IVAs to remain around the 40,000 level for 2013.”

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