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More people are going bust as credit card and personal loan borrowing soars

THE number of people going bustlast year jumped 13 per cent amid fears that the tide has turned for household finances.

A total of90,930 personal insolvencies were recorded across England and Wales, rising 13.1 per cent from 2015, the Insolvency Service said.

More people are going bust due to higher levels of personal debt

It is the first time since 2010 that the number of people entering insolvency has increased year-on-year.

It follows a warning from the Bank of England recently that vigilance was needed over rising levels of debt.

The number of companies going insolvent also increased last year, for the first time since 2011.

The rise in personal insolvency was driven by an increase in individual voluntary arrangements (IVAs) an agreement whereby money is shared between creditors.

Having fallen in 2015, IVA numbers jumped 23.2 per cent in 2016, with 49,745 recorded cases.

The official figures also include bankruptcies and debt relief orders (DROs) a type of insolvency often known as bankruptcy light, aimed at people with lower levels of debt that they cannot pay off.



Bankruptcy numbers fell in 2016, with 14,989 bankruptcy orders recorded, down 5.4 per cent on 2015.
There were 26,196 DROs in 2016, an 8.4 per cent increase.

A recent rise in the amount of debt people taking out a DRO are allowed to have, has enabled more to take out DROs instead of going bankrupt.

Mark Sands, a personal insolvency partner at RSM, said: In 2015 we saw the lowest levels of personal insolvency in over a decade, but the latest figures for 2016 show that the tide has now turned.

Despite record low interest rates and high employment levels during the year, many more people found that they could no longer keep on top of their debts.

Recent Bank of England figures have shown strong rises in consumer credit, prompting concerns from charities that people could be at risk of over-stretching their borrowing.

Low interest rates have been keeping repayments relatively affordable, but with an uncertain economy ahead there have been signs of households feeling a bigger squeeze from rising living costs.

Mike OConnor, chief executive of StepChange Debt Charity, said: Insolvencies are on the increase and consumer credit is hitting pre-financial crisis levels. We have also seen record numbers of people coming to us for debt advice in 2016.

It is time to look hard at whether the protections for people in financial difficulty are both adequate and accessible for the future.

The number of companies entering insolvency in the final quarter of 2016 jumped by 53.8 per cent compared with the previous quarter, with 5,564 cases.

Andrew Tate, president of insolvency and restructuring trade body R3, said the fall in the pound since the summer will have been a shock to some firms.

He said: Almost half our members have said Brexit has come up in discussion with struggling businesses since June.

2017 will be an important test: many larger firms will have been protected from the pounds fall by currency hedges or long-term fixed-price contracts, but these will unwind or end this year.

Businesses have been buoyed by resilient consumer spending since the EU referendum but much of this is on the back of increased borrowing its not clear how sustainable this will be.


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