The number of people facing unmanageable debts was down 19 per cent in 2015, which is a ten-year low. However, official figures show that problems began to arise for many in the second half of the year. The decrease is attributed to a rise in personal voluntary arrangements.
Government body The Insolvency Service released a report in December 2015 showing that 79,965 people were dealing with overwhelming debts by the end of the year.
Despite this being the fourth year in a row where the overall figure fell, there was a distinct upward trend in insolvency figures during the last three months of the year. Personal debt costs the British economy £8bn per year, according to the BBC.
A glance at the alternatives
Bankruptcy is often the first solution people consider to deal with huge amounts of debt, but it is a last resort for many given that it means you are likely to lose most or all of your assets.
To avoid losing larger assets like their house, many people will enter into an individual voluntary arrangement whereby a deal is struck with creditors and overseen by an insolvency practitioner such as www.carringtondean.com. The process carries less stigma but will involve paying a larger amount of debt in one go.
Finally a debt relief order is designed for those on a lower income with debts less than £20,000 to clear them without fully filing for bankruptcy. It has strict eligibility criteria and applies only to England, Wales, or Northern Ireland residents.
The corporate figures
When it came to business, 14,629 companies went into insolvency in 2015. This is the lowest figure since 1989 and a 10 per cent decrease on 2014. Specialised analysts have said that companies are recognising debt problems earlier, and banks see little benefit in shutting businesses down altogether for unpaid debts.
Also playing a part in this figure is credit forbearance and compulsory liquidation, both measures to avoid bankruptcy proceedings. Andrew Tate, vice-president of insolvency professionals trade body R3, said that so-called zombie businesses are playing more of a role, where companies pay the interest but not the debt itself.
Creditors often see little return as a result of compulsory liquidation, which is thought to be the driving force behind the fall in corporate insolvency.