The number of people declared insolvent in England and Wales during the second quarter of 2010 has fallen by 2.6 per cent marking the first drop since 2007.

The figures released by the Insolvency Service show that 34,743 people were made insolvent in the last three months, down from 35,682 in the first quarter of the year. These included bankruptcies, debt relief orders (DROs) and individual voluntary arrangements (IVAs).

However, the number of companies declared insolvent in the last quarter rose to 4,080, up by 0.5 per cent from the first quarter figures. But this was still up by 19.1 per cent from the percentage of firms forced into liquidation in 2009.

The research also revealed that the uptake of  IVAs  increased to 13, 466, which is a ten per cent rise from last year’s statistics. IVAs allow debtors to make set repayments to lenders whilst the interest on their debt is frozen.

DROs, an alternative to bankruptcy for people facing debts of less than 315,000 with lower than £300 of assets and a disposable income of £50 or less, were also higher in number.

Mr Sands, head of bankruptcy at RSM Tenon, said: “It’s not only a total loss of income that forces people down the insolvency route, it’s any reduction in income. The mooted movements of the public sector workforce to the private sector could lead to a period of unemployment and even a pay cut leaving them unable to cover their monthly outgoings”.