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Fewer individuals were declared insolvent in England and Wales last year than in 2010.

According to figures from the Insolvency Service as many as 119,850 individuals were declared insolvent in 2011. This is a fall of 11.3% in comparison to the previous year. However personal insolvencies are still happening at significantly higher levels than before the credit crunch. One in 366 people became insolvent last year compared to the 25-year average of one in every 1600 individuals.

Types of Personal Insolvency

In England and Wales there are three different ways in which someone can become insolvent -

Bankruptcy - the traditional way of dealing with overwhelming debts.

Individual Voluntary Arrangements (IVAs) - an agreement where a person agrees to repay some of their debts over a fixed period of time. In an IVA a percentage of the money owed is written off by the creditors.

Debt Relief Orders - often seen as a cheaper alternative to bankruptcy. Debt Relief Orders allow people on low incomes and with few assets to clear debt without going through the full bankruptcy procedure.

Through these different forms of insolvency there has been a shift away from bankruptcy to the newer and often more favourable IVA or Debt Relief Order. In the last year alone there was a 29% reduction in the number of people becoming bankrupt.

More information

Apply for an IVA

How to Consolidate Debt

Debt Management Plan Pros and Cons

Guide to Declaring Bankruptcy