Bankruptcies rise to new record. Is the UK economy heading for the rocks ?

Another sign that Browns so-called "economic miracle" was based on record levels of debt and is now going down the pan. When are the useless Tories going to wake up and start attacking New Labour on their mishandling of the economy...........

Bankruptcies rise to new record. BBC News 4thNov

The number of people declared insolvent in England and Wales in the third quarter of 2005 has hit a record high.

Department of Trade & Industry figures showed 17,562 personal insolvency cases, up 46% on a year ago, including 12,043 bankruptcies.

The DTI said there was no specific reason for the rise, which has now gone on for seven quarters in a row.

However, insolvency experts say it reflects the higher level of debt that has been taken on by the public.

The rising trend brings to 60,102 the total number of individual insolvencies during the past 12 months.

Individual Voluntary Arrangements

Of these, the sharpest increase has been seen in the voluntary procedure called the Individual Voluntary Arrangement.

This is an alternative to traditional bankruptcy.

Their number has nearly doubled in the past year, with 5,519 people choosing this route to resolve their debts in the third quarter.

A spokeswoman for the DTI said there was no special reason for the overall increase in insolvencies. She said it could be "peoples' circumstances, attitudes to debt or the availability of credit".

However, Pat Boyden, an insolvency expert at the accountants PricewaterhouseCoopers (PwC), suggested the figures reflected the rise in the total amount of personal debt in the UK.

"Last year we went through the £1 trillion barrier, with the amount we owe on mortgages, credit cards and personal loans. Well it is 12% more in the last 12 months."

"The increase in bankruptcies is a reflection of the amount we've borrowed," he concluded.

Changed attitudes

Before April 2004, anyone who was declared bankrupt typically had to wait at least three years before they could be discharged.

That time limit was reduced to just one year by the Enterprise Act (2002).

Philip Long, of the accountants PKF, reflected widespread opinion among insolvency experts that this has encouraged significantly more people to seek formal bankruptcy as a way out of their personal debts.

"The Act has made bankruptcy more of an option for many who would never have considered it before.

"Although being declared bankrupt will never be a pleasant experience,

12 months is a comparatively small price to pay for the relief of wiping the debt slate clean" he added.

Howard Archer at City firm Global Insight warned: "With unemployment likely to continue trending up, there is a very real danger that individual insolvencies will climb markedly further over the coming months."

Corporate insolvencies

The number of companies going bust is also on the rise.

In the third quarter of this year 3,389 firms in England & Wales went into liquidation

That was 14% more than during the same period last year.

According to Mike Jervis of PwC, this was because of the general economic slowdown seen over the past year.

"We did a survey of this and the reasons were the level of corporate debt, declining consumer demand for goods, increased regulation and rising costs, especially fuel," he said.

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Reply to
Crowley
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In message , Crowley writes

I think the rises in levels of bankruptcy could have been affected by the new rules on bankruptcy, turning it into a dark grey mark as opposed to a black mark, may make it seem an easier way out of problems.

Reply to
me

A friend of mine who specialises in helping people in bankruptcy situations has found more and graduates seeking to get rid of debts resulting from college fees (plus other things no doubt)

These dont fall into iether of the two options suggested.

Dave

Reply to
dave hall

u reckon

looks liks classic "easier way out of problems" to me

dont blame students either but i think they've stopped that now

Reply to
zjustice

In message , Crowley writes

No specific reason??? The fact that you are discharged in a year is a mega reason. How can you trust a Government which spins everything it gets its' hands on.

I remember Gordon Brown telling us that the recent petrol crisis would not cause a problem, and we needn't panic. The fact is that he was correct, but did I believe him - not a f£$k%^g chance!!

Reply to
Richard Faulkner

Has he? This was (briefly) possible, but not for long. According to the National Union of Students' website,

'There exist two types of Government student loan in the UK. The first was available to students who started their courses between September

1990 and August 1998 (or who were treated as continuing students when they started in the 1998/99 academic year). They are repaid as a direct debit directly to the Student Loans Company (SLC) in equal instalments which begin in the April following graduation, but these repayments can be deferred if the graduate's income is low enough. They are usually referred to as ?mortgage-style? loans.

'The second type were introduced in September 1998 for all new students from then onwards. These are sometimes called income-contingent loans, and are repaid through the tax system after graduation. The amount of repayment will depend on the amount you are paid by an employer or earn as someone who is self-employed.

'It was for a time possible to discharge yourself from liability to repay (that is, cancel) the second type of loan by declaring yourself bankrupt, and over 1000 students and graduates did just that. The Government had never intended to allow this, however, and in England and Wales they used the Higher Education Act of 2004 to close the loophole. Similar provisions have since been made for Scotland and Northern Ireland.

'Mortgage-style loans were always protected from bankruptcy so the law in relation to these remains unchanged.

'Therefore, regardless of the type of loan that you have (and whilst you are still able to declare yourself bankrupt should you wish to do so) any outstanding student loans will not be cancelled and must still be repaid according to the loan agreement you signed. '

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Steve

Reply to
Stephen Glynn

I only half listened to the article but the BBC's Working Lunch said that once you get back on your feet and have assets your former creditors can come looking for you again. They had one guy who suddenly found a charge on his house 14 years after being discharged. I almost felt sorry for him.

The bankrupcy expert the Beeb talked to said the new rules were a trap for the unware who thought they could solve their debt problems.

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Reply to
davidof

I don't think so under the new rules.

AIUI this is a problem of the transitional arrangements.

Under the old rules, the creditors could place a charge on your house, but allow you to live in it until you wanted to sell, at which point they would get their money.

Under the new rules they can't do this, they have to re-posess the house virtually immediately.

Thus there are lots of former bankrupts who are living in houses with charges on them. The transitional arrangements for moving all of these people to the new rules are that these houses now have to be reposessed within 3 years or the creditors lose the opportunity forever. Is it suprising that they are reposessing en-mass?

tim

Reply to
tim (moved to sweden)

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