Insolvencies hit new record

MONDAY, DECEMBER 04, 2006

In official data that was released today, it was shown that the number of insolvencies in England and Wales has increased by more than 55% over the three month period from July – September which amounts to 27,644 insolvencies. This is just the latest in a number of reports that have been issued by private firms and government organizations stressing the dire financial condition of many residents in the UK and Wales.

The Insolvency Service reported that between July and September, 15,416 people went bankrupt and 12,228 more took out an individual voluntary arrangement (IVA). IVAs let those in debt reach an agreement with their lenders where they will repay and agreed amount of money over a period of time and get creditors to freeze interest payments so that the debt can more easily be paid off. According to the Insolvency Service, “20,293 people in the UK took IVAs in 2005 while almost the same amount did so in the first half of this year alone.”

The number of bankruptcies is 26.6% more than it was last year while the number of insolvencies taken out during this period is an astounding 117.9% increase over last year.

Steve Treharne, head of personal insolvency at financial services group KPMG, said, “The number of people entering IVAs was rising at an astonishing pace” and that the, “average debt owed by someone entering an IVA is almost £50,000” He went on to say that over 1000 people who were issued IVAs sometime in the last quarter had a debt in excess of £100,000 in the last quarter.

Malcolm Hurlston, chairman of the charity the Consumer Credit Counseling Service, said: 'We are concerned by the narrowing gap between the number of bankruptcies and IVAs. If the current trend continues the number of IVAs will overtake the number of bankruptcies next year and that is an indication that the IVA solution is becoming more popular than is good for people.'

Frances Walker, also from the CCCS, said on the BBC Lunchtime News that although IVAs seem attractive, many people who are taking IVAs would be better off filing for bankruptcies.

IVA companies have been earning great profits due to the rise in the popularity of these IVAs as many of these companies can earn anywhere from £1,000 to more than £5,000 for each IVA they help arrange. Yesterday, one of the largest and most popular IVA providers, Debt Free Direct, reported that it has seen a “101% rise in turnover compared with the same six months a year ago.” Other IVA companies, such as Accuma who reported that they have grown over 250% over the last year, are also doing quite well.Coronation Street actor Chris Walker a co-founder of Regional Money Helpline, said: 'Personal debt in the UK is rising by £1m every four minutes, and currently stands at a staggering total of £1.3 trillion.