Rise in number of insolvencies

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A total of 17,341 people were made bankrupt on a seasonally adjusted basis during the three months to the end of September, 12.1% more than in the second quarter and a 9.5% rise compared with the same period of the previous year.

The increase reported by the Insolvency Service reversed the downward trend in bankruptcy numbers that had been seen during the previous six quarters.

The figures also showed a jump in the total number of individuals declared insolvent, while the number of companies going into liquidation rose at its fastest rate for 18 years.

Commentators warned that the figures were the beginning of an upward trend that would see a record number of individuals declared insolvent next year as the economic downturn worsens.

Pat Boyden, personal insolvency expert at PricewaterhouseCoopers, said: "Bankruptcies have increased for the first time for some months and this significant rise is worrying. (Thursday's) interest rate cut may bring some relief although it may be too late for those in deep financial difficulty."

A total of 27,087 people were made insolvent during the third quarter of the year, 8.8% more than in the previous three months and 4.6% more than during the same period of 2007. Within this figure, 17,341 were declared bankrupt and 9,746 people took out individual voluntary arrangements (IVAs), under which interest on debt is frozen in exchange for a set amount being repaid each month.

The IVA number represented a 3.3% rise on the previous three months, but was 3.1% down on the third quarter of 2007.

Mark Sands, director of personal insolvency at KPMG, expects a record 150,000 people to be declared insolvent during 2009.

KPMG said it had seen an increasingly large proportion of homeowners taking out IVAs during the past year, with people with mortgages now accounting for 45% of those seeking help, up from 30% last year. The average debt owed by someone taking out one of the arrangements is now £48,400, but the group said it saw 500 people during the third quarter who had amassed borrowings of more than £100,000.