Personal insolvencies expected to soar

A recent report has claimed that the number of personal insolvencies in the UK is expected to soar, with a new alternative to bankruptcy expected to result in figures rising. Debt Relief Orders have come into force this month, and it is thought that they will result in personal insolvency levels rising by around 20 percent.

If the level of insolvencies does rise by this level it could take personal insolvencies to a new record high. With a Debt Relief Order someone that is on a low income could get their debt written off without having to pay the fees that are normally associated with bankruptcy. However, eligible consumers will have to meet strict regulations with regards to asset levels and how much disposable income they have left at the end of the month.

Mark Sands, head of personal insolvency at accounting group KPMG, said: ‘DROs will bring new people into the insolvency system. ‘We are talking about people with very little income, no assets and debts of £15,000 or lower.’ He added: ‘Until now, they are the sort who would have made token payments on the debt or simply laid low until the six-year limitation on debt enforcement was passed.’

Whilst these DROs could help some people on low income and with high unsecured debt levels, who could not afford to go for bankruptcy, some people have expressed concern that the orders could make it too easy for many people to escape from their debt.