Posted: Fri Feb 02, 2007 11:13 am
The number of people who were declared insolvent in England and Wales rose to a new record of 107,000 last year.
That was a 59% increase on the year before, when 67,500 people went bust.
The rise was mainly due to a sharp increase in the number of people entering individual voluntary arrangements (IVAs).
The number of individual insolvencies also rose in Scotland and Northern Ireland, though not as fast as in England and Wales.
It is widely expected that the rising trend of personal insolvencies will continue this year.
But Pat Boyden, an insolvency specialist at the accountants PricewaterhouseCoopers doubted that the increase would be as fast as in 2006.
"I wouldn't predict a huge increase this year - though the recent increases in interest rates may put the squeeze on unsecured borrowing," he said.
Earlier this week it was revealed that 2006 saw a 65% rise in the number of homes being repossessed by lenders, albeit at a very low level.
IVAs slow down?
Despite the extensive publicity given recently to IVAs, the rise in their number almost ground to a halt in the last three months of last year.
All creditors are worried about people dumping debt without them being in genuine financial hardship
Pat Boyden, PWC
There were just 4% more of them than in the previous three months.
By contrast, the last quarter of 2006 saw a sharp rise in bankruptcies, which were up by nearly 10% over the three months.
One possibility is that some debtors have been forced to chose bankruptcy recently because of a harder attitude being adopted by some lenders towards IVA agreements.
Banks such as HSBC and Northern Rock are now demanding a much higher level of prospective repayment before they will agree an IVA with a customer.
The industry standard is a repayment of 25p in the pound, but HSBC now asks for 40p in the pound.
"All creditors are worried about people dumping debt without them being in genuine financial hardship," said Mr Boyden.
Personal debt
The growing number of insolvencies is partly the inevitable fallout from the rising level of personal debt in the UK.
"Citizens Advice bureaux dealt with 1.4 million debt problems in the last financial year," said Sue Edwards of Citizens Advice.
"There are thousands of people who have substantial debt and will never be able to pay it off," she added.
In the past eight years the amount of non-mortgage debt held by people in the UK has doubled to £212bn, stimulated by the growth of the economy and relatively low interest rates.
However the past couple of years has also seen a rapid rise in the number of "debt management" companies who specialise in organising IVAs for their customers.
They are widely credited - or blamed - for encouraging people to use IVAs as a way of resolving their debts.
Their activities are being closely monitored by the authorities, and the Office of Fair Trading recently wrote to 17 of them, warning them to stop publishing misleading advertising on TV and in newspapers.
According to the accountants KPMG, lenders such as High Street banks wrote off £1.4bn last year as a result of customers proposing IVAs.
Source: BBC News Online
Please post any news stories about IVAs here:
http://www.iva.co.uk/forum/default.asp?CAT_ID=5
See my Blog:
http://ivanews.blogs.iva.co.uk
That was a 59% increase on the year before, when 67,500 people went bust.
The rise was mainly due to a sharp increase in the number of people entering individual voluntary arrangements (IVAs).
The number of individual insolvencies also rose in Scotland and Northern Ireland, though not as fast as in England and Wales.
It is widely expected that the rising trend of personal insolvencies will continue this year.
But Pat Boyden, an insolvency specialist at the accountants PricewaterhouseCoopers doubted that the increase would be as fast as in 2006.
"I wouldn't predict a huge increase this year - though the recent increases in interest rates may put the squeeze on unsecured borrowing," he said.
Earlier this week it was revealed that 2006 saw a 65% rise in the number of homes being repossessed by lenders, albeit at a very low level.
IVAs slow down?
Despite the extensive publicity given recently to IVAs, the rise in their number almost ground to a halt in the last three months of last year.
All creditors are worried about people dumping debt without them being in genuine financial hardship
Pat Boyden, PWC
There were just 4% more of them than in the previous three months.
By contrast, the last quarter of 2006 saw a sharp rise in bankruptcies, which were up by nearly 10% over the three months.
One possibility is that some debtors have been forced to chose bankruptcy recently because of a harder attitude being adopted by some lenders towards IVA agreements.
Banks such as HSBC and Northern Rock are now demanding a much higher level of prospective repayment before they will agree an IVA with a customer.
The industry standard is a repayment of 25p in the pound, but HSBC now asks for 40p in the pound.
"All creditors are worried about people dumping debt without them being in genuine financial hardship," said Mr Boyden.
Personal debt
The growing number of insolvencies is partly the inevitable fallout from the rising level of personal debt in the UK.
"Citizens Advice bureaux dealt with 1.4 million debt problems in the last financial year," said Sue Edwards of Citizens Advice.
"There are thousands of people who have substantial debt and will never be able to pay it off," she added.
In the past eight years the amount of non-mortgage debt held by people in the UK has doubled to £212bn, stimulated by the growth of the economy and relatively low interest rates.
However the past couple of years has also seen a rapid rise in the number of "debt management" companies who specialise in organising IVAs for their customers.
They are widely credited - or blamed - for encouraging people to use IVAs as a way of resolving their debts.
Their activities are being closely monitored by the authorities, and the Office of Fair Trading recently wrote to 17 of them, warning them to stop publishing misleading advertising on TV and in newspapers.
According to the accountants KPMG, lenders such as High Street banks wrote off £1.4bn last year as a result of customers proposing IVAs.
Source: BBC News Online
Please post any news stories about IVAs here:
http://www.iva.co.uk/forum/default.asp?CAT_ID=5
See my Blog:
http://ivanews.blogs.iva.co.uk