Nearly 70,000 people became insolvent in 2005, the highest annual total since records began

Bankruptcies show sharp increase

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Nearly 70,000 people became insolvent in 2005, the highest annual total since records began, the Department of Trade and Industry (DTI) has said.

There were 20,461 insolvencies in the final quarter of 2005, a rise of

57% on the same period in 2004.

The rise in insolvencies has been blamed on greater personal debt, slow growth and bankruptcy rule changes.

About two-thirds declared themselves bankrupt, the rest took out Individual Voluntary Arrangements (IVAs).

IVAs are an alternative to bankruptcy which allows debtors to come to an agreement with their creditors.

Under IVAs debtors agree to repay a set amount each month in return for the freezing of interest charges.

Credit boom

In total, 13,501 people were officially declared bankrupt during the final quarter of 2005, up 10.9% on the previous quarter and 37.6% year-on-year.

Accountancy and consultancy firm KPMG pointed the finger at the UK credit boom of recent years for rising bankruptcies.

"The levels and availability of credit have been increasing for some time and recent figures from the Bank of England show that this trend is continuing," Steve Treharne, head of personal insolvency at KPMG, said.

"The more people incur credit, it is inevitable that this will be followed by increases in personal insolvencies," he added.

Company insolvency

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

In the third quarter of this year 3,187 firms in England & Wales went into liquidation.

That was 8.5% more than during the same period last year.

Softer option?

Experts have argued that recent changes to bankruptcy laws have made people more willing to choose bankruptcy as a way of sorting out their finances.

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).

Groups representing debt collectors have previously described the new bankruptcy rules as a "softer option."

The introduction of IVAs has also eased the burden for some people.

During the final quarter of 2005 6,960 people took out IVAs.

"The rise in IVAs is more likely to mean that more people are finding solutions than that more people are getting into trouble," Malcolm Hurlston, director of debt charity the Consumer Credit Counselling Service, told BBC News.

Reply to
Crowley
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More willing? I am a case worker for a charity and this is our preferred option now for those cases where the person is unemployed, receives DLA, smokes, drinks, spends hours at the turf accountants and is still being given credit cards and personal loans. At least the process of going bankrupt has made it more difficult for them to be offered or get credit.

Reply to
Colin Forrester

You can still get a mortgage whilst branrupt apparently, so what's to say they don't get loans again and not pay them?

Reply to
mogga

Indeed. Being debt-free after their bankruptcy, they'll probably be prime candidates for aggressive mortgage and credit-card lending.

I guess this is the government's new plan to deal with wage deflation: the poor can just borrow vast sums, spend it, go bankrupt and start again. I just wonder why anyone still bothers to work in this country.

Mark

Reply to
mmaker

That's a valid point.

There has recently been a progamme on morning TV surrounding the personal consequences of unsustainable personal debt. It was interesting even if somewhat contrived. Here the favoured option of the experts seemed to be the IVA option.

This I find hard to believe. According to the TV programme the bankruptcy option denies you a mortgage facility for typically 6 years which is why clients were advised against it.

Lenders do have to be sure that their debtors are reasonable risks. A few years ago, my son had a problem with a former tenant regarding arrears of rent after leaving a property.In the end he obtained a CCJ against him. Needless to say he didn't cough up and the loss was put down to experience.

However, around two years later, this guy rolls up out of the blue insisting upon discharging his debt. It appears that he wanted to get married and buy a house but the existance of an undischarged CCJ had proved an impediment to him being granted a mortgage.

Reply to
Mel Rowing

I hope your son insisted upon back interest?

It must be quite pleasant to have one of these wasters by the balls.

FoFP

Reply to
M Holmes

I am not aware you would get a mortgage - although there is nothing to prevent you trying. However the cases I deal with are without exception renting their accommodation or the state pays. As for loans it does mean that some of my cases will resort to sharks but that is an option that is very difficult to close off.

Reply to
Colin Forrester

However, as I understand it, the law hasn't changed in Scotland, but the increase in bankruptcies there is pretty much in line with the rest of the country.

Reply to
Jonathan Bryce

It strikes me that you appear work at the charity largely for the pleasure of judging people, there again maybe I'm naive when it comes to the outcomes of extremely lax lending criteria ;)

Reply to
Aztech

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4591

"Yep. When I was thinking about bankruptcy, I got in touch with Gill Hankey at the Bankruptcy Advisory Service -

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. She sits on the govts advisory panel regarding credit and bankruptcy and really knows her stuff. When I used her, she used to have a couple of mortgage brokers who can help a bankrupt get a mortgage to either buy a house or secure theirs from the Official Receiver without any interest rate penalties."

Reply to
mogga

Reply to
Ian Cornish

I am required to gather the facts as given to me by the cases and observed on visits, complete some paperwork, get the case to proof read and sign agreement. During the meetings I will have access to a cases bank statements, loan agreements, certain legal documents etc. The completed paperwork is reviewed by others and decisions on the case are made by others. The training I received means I gather the data in a methodical manner etc. I am not allowed to make any recommendations to the case directly - but I am always notified of the outcome.

The judging of people is a separate matter - and based upon the results of that data gathering carried out over the past few years. It is true that the cases I see are of a particular type and my results are skewed

- but I can compare cases I have reviewed prior to and after the changes to the bankruptcy law and I now see the different approach taken by charities and welfare rights teams.

Reply to
Colin Forrester

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