Personal insolvencies have dropped to their lowest level since 2008, despite the tough economic conditions, official figures showed today.
There were 28,973 individual insolvencies in England and Wales in the fourth quarter of 2011, a 4% drop on the previous quarter, the Insolvency Service said.
The total number of personal insolvencies in 2011 was 119,850, a decrease of 11% from 2010.
This included 41,845 bankruptcies, which were down 29% on 2010, 49,056 Individual Voluntary Arrangements (IVAs) - down 3% on 2010 - and 28,949 Debt Relief Orders (DROs), a 15% rise on the previous year.
Analysts warned that the rise in those taking out DROs hinted that many people could slip further into insolvency as employment conditions deteriorate and bills pile up.
In December, the Insolvency Service said that one in four people taking out a DRO is aged between 25 and 34.
Dubbed "bankruptcy light" by some, they are a formal process aimed at people who have more modest levels of debt but no realistic prospect of paying it off. The maximum allowable debt is £15,000.
Nick O'Reilly, an insolvency practitioner at chartered accountants HW Fisher & Company, said: "The huge leap in the number of debt relief orders - often seen as 'bankruptcy light' - hints at more trouble to come.
"To qualify for a DRO, a person must have relatively small debts - of less than £15,000. But there's every chance that those struggling with DROs now could slip into insolvency proper."
Louise Brittain, a partner in Deloitte's insolvency team, said: "As the labour market continues to deteriorate, we will see more households struggle to pay their debts as unemployment levels increase. We have seen a noticeable increase in professionals filing for bankruptcy and we can see this trend continuing."
She highlighted a "boom" in the payday lenders market, and continued: "We will inevitably continue to see large numbers of individuals become insolvent in 2012. We predict the number of individuals entering in insolvency in 2012 will top 120,000."
Frances Coulson, president of insolvency professional trade body R3 said today's decrease did not necessarily mean people were becoming better at dealing with their finances and warned this year could be even tougher than 2011.
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