UK bankruptcy levels hit record high

By Elliot Wright, 5th February 2010

A record number of Briton's were declared bankrupt last year while a further one million individuals struggling with debts are not seeking help from their creditors.

The Insolvency Service is expected to reveal today that an all-time high of 130,000 struggling borrowers entered into debt arrangements including debt relief orders, individual voluntary arrangements and bankruptcy during 2009.

However, research by insolvency firm R3 suggests that a further 961,000 heavily indebted individuals are suffering in silence and not asking for help.

A further 574,000 have contacted their creditors informally for help and an estimated 500,000 are in debt management plans not recorded by the Insolvency Service.

R3's president, Peter Sargent, said: "Formal insolvency figures only show so much. Outside of formal insolvency there are a huge number of individuals in financial distress or informal arrangements. The debt iceberg is much deeper than it first appears."

A further 961,000 heavily indebted individuals are suffering in silence and not asking for help.

He added: "Although it can seem scary, being honest with creditors is a helpful step and can prevent formal insolvency in the long run."

Despite the UK officially exiting the recession it is expected that personal finances will suffer for some time to come and insolvencies will continue to rise.

Financial firm Deloitte expect there will be 145,000 insolvencies this year, with R3 putting the figure at 153,000.

Louise Brittain, from Deloitte's insolvency arm, said: "'With increasing financial pressures combined with rising unemployment levels, the number of creditors pursuing debts will undoubtedly rise out of necessity; and as debt relief orders becoming more widespread, it is inevitable that we will see a consequent rise in the number of people filing for bankruptcy. The figure has yet to peak, and unfortunately 2010 will only see current figures rise.'

Claims Financial