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BankruptcyNews
Junior Member
358 Posts |
 Posted - 10 May 2007 : 10:12:56
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Insolvency increases driven by volunteers
The latest increase in personal insolvencies is being driven by people voluntarily entering bankruptcy or an Individual Voluntary Arrangement, instead of creditors instigating proceedings, says Grant Thornton.
In the first quarter of 2007 personal insolvencies rose by 23.9% on the previous year, with 30,075 individuals declaring themselves bankrupt or entering into an IVA – equivalent to 330 people a day.
Grant Thornton says analysis of the figures issued by the Insolvency Service show bankruptcies increased by 10% compared with 12 months ago, while the growth in IVAs has continued at a rate of 47.6% over the same period.
Mike Gerrard, head of personal insolvency at Grant Thornton, says the fact remains many in the UK are still hooked on spending on credit, and the ensuing consequences are being exacerbated by continuing increases in the cost of living, over and above the rise in income levels.
He adds: 'More and more people are finding their already precarious finances squeezed further, with many unable to cope and fast-tracking to IVAs or bankruptcy - once the last resort but now ever more common.'
Gerrard also points out the instances where creditors initiate proceedings against individuals who are unable to repay their debts have been largely unchanged for the last eight years, while the proportion of people 'throwing in the towel and opting for a bankruptcy themselves has gone through the roof'.
He believes the increase in personal insolvencies is being fuelled by significant increases in the cost of living, in particular the consecutive interest rate rises mean in 'just over three years the cost of an average 25-year standard variable rate repayment mortgage of £100,000, has increased by £530 a year, while the average household utilities bill has increased by £225 since 2004/05'.
Gerrard adds: 'Many have simply not coped with its effects. Higher outgoings, coupled with the effect of interest rates on credit and store cards that may have rates of between 20 to 30%, represent a serious problem for anyone walking a financial tightrope.'
However, Mark Allen, head of IVAs at Grant Thornton, says the rise in IVAs is despite a tougher stance by creditors, which is leading banks to implement more stringent policies on debt recovery, and even rejecting IVA proposals which are deemed too lenient.
He adds: 'As a consequence, the rate of growth of IVAs has slowed. Additionally, on the back of complaints to the advertising watchdog the more aggressive examples of IVA advertising are being prevented, and this too may have stunted the growth of IVA numbers.'
Source: accountancyage.com
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Insolvency increases driven by volunteers
