Bankruptcy Reaches Lowest Rates Since 2003

The number of people that are declaring themselves bankrupt has reached its lowest rate since 2003 but the number of people taking out recently introduced DEOs has risen.

Bankruptcy should be considered a final option and should only be followed once all other options have been thoroughly explored. While it will clear the majority of debts a person holds, it will remain on your credit file for as long as seven years and it will be very difficult to find any form of credit that you will be accepted for during this period. It can even become difficult to get a bank account or a mobile phone contract.

27,390 personal insolvencies were registered in the second quarter of 2012 which represents a drop of 10.2% on the same period a year ago. However, there has been an increase of 10% on the number of people that have taken out a DRO; the cheaper alternative to bankruptcy which is aimed at those with debts of less than £15,000 and be on a low income.

A Debt Relief Order is cheaper than bankruptcy, which costs £700.

Another alternative to bankruptcy is an IVA. In an IVA, debtors reach agreement to pay a reduced amount of their debts to creditors. This type of arrangement has become more popular and the number of people taking out this alternative product has also dropped by 7%. Despite this drop there are still more people that have taken out an IVA than have declared bankruptcy.



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