There was a fall in the number of people going bankrupt in the first quarter of 2012 but more people are experiencing debt problems and many are simply unable to afford the ?700 bankruptcy fee.
According to the latest figures from the Insolvency Service, 28,723 individuals in England and Wales became insolvent in the first quarter of this year, 4.7 per cent less than in the first quarter of 2011.
Just 9,132 of these individuals entered into bankruptcy, a substantial 27.2% fewer than in the 2011 same period.
However there was a year-on-year increase in people becoming insolvent through individual voluntary arrangements and debt relief orders.
Individual voluntary arrangements, in which borrowers agree to repay a percentage of their loan over a specified period of time, increased to 11,694, 8 per cent more than in the 2011 first quarter.
There was an even greater increase in the uptake of debt relief orders (DROs), which allow borrowers with debts of up to ?15,000 to write them off ? as long as they do not own their home, have savings and assets of less than ?300 and have a disposable income of just ?50 a month or less.
The number of DROs taken out in the 2012 first quarter increased 16.3% year-on-year to 7,897.
According to the Consumer Credit Counselling Service, six million households are at risk of falling into insolvency soon, with their finances stretched by high inflation, rising unemployment and changes to benefits.
David Birne, an insolvency partner at accountant HW Fisher, warned that the decision of mortgage lenders to increase their SVR rate could tip more people into insolvency.
The latest figures from the Insolvency Service also reveal an increase in the number of businesses becoming insolvent.
There was a 4.3 per cent increase in business insolvencies in the first quarter of 2012, with 4,303 firms going bust.
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