The number of people taking out a debt relief order (DRO) across England and Wales surged to a record high in the third quarter of this year.

Some 8,438 DROs were taken out between July and September, marking a 49% jump compared with the same quarter in 2022, according to figures from the Insolvency Service.

It said the number of DROs was the highest quarterly number since their introduction in 2009.

A DRO is one formal option for people to deal with their debts if they owe £30,000 or less and have no realistic prospect of paying off the money. Taking one out could make it harder to get credit in the future.

The number of people needing “breathing space” from their debts also jumped.

There were 23,089 breathing space registrations in the third quarter of 2023, which was a 26% increase compared with the third quarter of 2022.

Within this total, 22,722 were standard breathing space registrations and 367 were mental health breathing space registrations.

A standard breathing space is available to people with problem debt and gives legal protections from creditor action for up to 60 days.

A mental health crisis breathing space is available to someone who is receiving mental health crisis treatment. It lasts as long as the person’s mental health crisis treatment, plus 30 days.

Christina Fitzgerald, immediate past president of R3, an insolvency and restructuring trade body, said: “Debt relief order numbers are at their highest for more than a decade.

“It’s likely that this is because of the increase in the DRO threshold, and suggests that the cost-of-living crisis is resulting in more people turning to these processes for help managing their debts.

“Finances remain a major concern for many people right now.

“The costs of food, fuel and energy, the health of the economy and job security are key areas of worry, and mean people are scrutinising every penny – even when it comes to paying for the essential.

“We expect this to continue as the weather gets colder and Christmas approaches.”

Formal personal insolvency figures are made up of DROs, individual voluntary arrangements (IVAs) and bankruptcies.

Across England and Wales, 24,418 personal insolvencies were registered in the third quarter of 2023, which was 6% lower than the previous quarter and 15% lower than the same quarter in the previous year.

Within this total, IVAs were the most common personal insolvency procedure (57% of cases), followed by DROs (35% of cases) and bankruptcies (8% of cases).

IVAs made up a smaller proportion of personal insolvencies in the latest quarter than two years ago. The reduction has been driven by both a fall in IVA numbers and an increase in DROs, the Insolvency Service said.

While there has been a long-term decline in bankruptcy numbers, the first three quarters of 2023 saw a slight increase from their 40-year low annual number in 2022, it added.

There were also 6,208 company insolvencies registered across England and Wales in the third quarter of 2023, which was 10% higher than during the same quarter in 2022, but 2% lower than in the second quarter of 2023.

Mark Ford, a partner in restructuring and recovery services at professional services firm Evelyn Partners, said: “Escalating interest rates have added to the cost of servicing the already increased debt burden of some firms, made refinancing impossible or punitively expensive for others, and generally made access to funding difficult.

“Meanwhile, high levels of inflation have sent costs through the roof for most businesses, and this is not just the case for raw materials and energy, and many imports, but also for wage bills as earnings growth has gathered pace.”

He added: “As wage rises seem to have further to go, we can expect the costs environment for some firms to become more challenging, particularly but not exclusively in construction, retail, leisure and healthcare sectors.

“All this comes amid some persisting effects from the aftermath of the pandemic. Many businesses have emerged post-Covid significantly more vulnerable, having eaten through their cash reserves just to survive.”