Official figures ignore almost three out of every four insolvent households

New regional insolvency figures are missing the true scale of debt in households up and down the country, according to national debt charity Debt Advice Foundation.  An analysis of calls to the charity’s helpline show that for every Debt Relief Order (DRO), Individual Voluntary Arrangement (IVA) and Bankruptcy in 2011, there were almost three more households with less coming in than going out.

The Insolvency Service reported that in 2011 there were just under 120,000 insolvencies (defined as DROs, IVAs and Bankruptcies) in England and Wales.  There are no official figures for Debt Management Plans; however, the charity has estimated that at least 75,000 new plans will have been set up in England and Wales over the same period.  Alarmingly, this means that almost a quarter of million households could be facing insolvency without the help of a recognised debt solution programme.

“Debt Advice Foundation managing director David Rodger said: “Today’s regional statistics highlight the drop in rates of bankruptcy – but we believe that  the continued drop in bankruptcy orders is a direct result of the increasing cost of bankruptcy, which at £700 has risen by 40% in just two years.  This is in stark contrast to the much more modest cost of a Debt Relief Order, which has remained the same at £90 over this period, and IVAs, which in many cases have no upfront cost.

“But these figures mask the fact that at up to three times the number of households are actually insolvent, with insufficient income to cover their essential household costs and credit repayments."

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