UK Citizens Delve Further into Debt

WEDNESDAY, OCTOBER 11, 2006

The debt situation in the United Kingdom continues to worsen after a new record number of people are filing for bankruptcy and tens of thousands are at risk of losing their homes and many of their personal assets.

Lending accountants and politicians are urging people to think about their financial situation and be smart with their financial decisions as currently, 23,251 people filed for bankruptcy in England and Wales. This number has not been this high since the 1960’s.

According to the Department of Trade and Industry (DTI), the latest debt totals show a 13% increase from the last three months and almost a 75% increase from this time last year. There have also been well over 30,000 court action is both England and Wales in the 1st quarter filed by mortgage lenders threatening to take homes if debts were not paid immediately. This is a 29% from last year.

Concern over the rising numbers of people tempted to sink too deep into the red to cope was heightened by other figures showing a surge in court actions by mortgage lenders to repossess homes.

“A growing buy-now, pay-later culture has led to seriously high levels of personal insolvencies,” Mike Gerrard, of Grant Thornton, the accounting group, said. He and other accountants predicted that the number of personal bankruptcies will top 100,000 this year — with 259 people a day becoming insolvent.

Pat Boyden, of PricewaterhouseCoopers, said “We are paying the price of a spend-now-worry-later culture. Record personal insolvencies are the result of a debt culture which has become endemic in the UK.”

Even though Individual Voluntary Arrangements (IVAs), the most popular alternative to bankruptcy, is picking up steam, record numbers of people are still filing for insolvency.

Lee Manning, a partner in Deloitte, the accountants, said: “Bankruptcy has become a much easier process [and] now typically lasts only one year. Why would a person struggle the pay off a debt mountain when filing for bankruptcy is much simpler and, in many situations, a much shorter-term solution.”

Not only are people filing for bankruptcy, according to the latest reports, almost 3500 companies went bankrupt in the first quarter of 2006, a 7.6% increase from the last three months and a 17% increase from last year.

Further aggregating this problem is the constant threat of rising interest rates that will make it even harder for those in debt to pay off what they owe.

The government needs to step in and do something as this problem spirals out of control.