The number of people becoming personally insolvent has risen for the first time in a year, official figures show. The Insolvency Service reported that there were just over 30,500 personal insolvencies in April, May and June, up from 30,162 in the three months to March. Although these numbers are up on last quarter, this total is actually 12 per cent less than the same point last year, when insolvencies were running at a record high. The number of bankruptcies continued to decline, as they fell by almost 26 per cent compared with last year, as did Individual Voluntary Arrangements (IVAs), which were down nearly 10 per cent. However, debt relief orders - the low cost alternative to bankruptcy †were up by 15.3 per cent. Surprise falls Personal insolvencies had fallen in each of the last three quarters, to the surprise of some commentators given the tough economic background. Mark Sands, head of personal insolvency at accountants RSM Tenon, said that the relatively small number of personal insolvencies is partly down to low interest rates. â€It’s very likely that much of this is to do with the low interest rates, which have now been kept close to zero for a staggering 29 months, and look set to stay low in the near future. This particularly benefits homeowners: huge numbers of people in the current economic climate would have left struggling to make their mortgage payments are saved from going under.’ James Falla, personal debt expert at beatmydebt.com agrees. "There is no question that the number of people declaring themselves personally insolvent has been kept down due to low interest rates. Once rates start to rise which may not be until 2012, there are many people who are going to be put in a postiion where they can no longer afford thier mortgage payments which will force them into using debt management solutions to protect their homes" he sais. Complicated picture Sands added that people in rented properties seldom see the direct benefit of low interest rates, along with those with unsecured debts as interest rates on credit cards and bank loans do not follow the trend of the base rate. â€So the picture is complicated, and there are more factors influencing the current low number of personal insolvencies than the actions of the monetary policy committee.’ On his estimates, personal insolvencies for the whole of 2011 could drop to 120,000, which would represent the lowest annual total since 2008. Last year was a record year with 135,089 people declaring themselves insolvent. Another reason suggested for the low total is that the problems caused by the credit crunch have limited the amount of money people can borrow. James Falla advised anyone struggling to repay their debts to get expert advice. "If you are struggling with your debts, there is always a temptation to try and ride out the storm by borrowing more, particularly with the availability of payday loans. However, this rarely helps and more often than not will make the situation worse. It is far better to consider a debt management plan or IVA which will reduce the payments you have to make an help protect rent or mortgage payments" he advised.
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