A record number of people declared bankruptcy or took out an Individual Voluntary Arrangement (IVA) during 2009, according to new figures from the Insolvency Service.
The number of people declaring insolvency or taking out an IVA or Debt Relief Order (DRO) rose to 134,142, which is equivalent to one in every 320 adults.
Of those 134,142 people, 35,574 were declared insolvent in the last three months of 2009.
Rising unemployment levels and the effects of the recession are blamed for pushing up insolvency levels past the 2006 record of 107,288 personal insolvencies.
The record low interest rates will have delayed insolvencies for some people, but long-term unemployment could make it hard for some people to avoid becoming insolvent.
The new style DRO’s are also thought to have attributed to the number of personal insolvencies. The DRO’s allow people who are in debt, but have relatively few assets, to write off their debts without declaring full bankruptcy.
The Insolvency Service said: "Some of those who had a DRO approved would have been declared bankrupt had the DRO route not been an option, but it is not possible to quantify this proportion."
The number of IVA applications also soared to 26.3%, with people making the arrangements to repay part of their debt over a set period of time. There were 17,007 bankruptcies; down 5.5% on the same quarter of the previous year, and 5,348 Debt Relief Orders included in the figures.
“The director of personal insolvency at KPMG, Chris Nutting said: “While Britain is technically out of recession, the harsh reality is that many people are still living beyond their means. Lessons from history show that personal insolvencies will continue to rise after the recession finally ends and for some time to come."
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