Is the insolvency road about to get busier?
January 19, 2008
Over recent years more and more people have been turning to insolvency in order to escape mounting debt that they can never hope to repay. The past couple of years has seen an increase in the number of glossy advertisements relating to IVAs (Individual Voluntary Arrangements) and this has raised awareness amongst consumers with regards to this possible course of action.
Many experts have expressed concern that some people, such as younger people, are accruing huge levels of debt safe in the knowledge that should things get out of hand they will be able to escape this debt by declaring insolvency.
There has been a rise in the level of insolvencies, with around 110,000 people declaring themselves bankrupt or entering into an IVA last year, and although many of these have stemmed from problems with rising mortgage repayments and living costs putting a strain on finances, others have arisen from people getting themselves into debt through irresponsible and frivolous spending.
Experts have predicted that the insolvency road in the UK is set to get much busier this year, with around 130,000 people expected to declare bankruptcy or enter into an IVA over the course of the year. Worryingly nearly 30,000 people are expected to file for bankruptcy or enter into an IVA during just the first three months of the year, and a good proportion of these will be filing simply because of the amount that they have spent over the Christmas period.
One industry professional stated: “Sadly, many individuals spend up on credit at Christmas and pay no heed to the financial warning bells. Come January, they find themselves in a situation where previous financial woes are compounded by the bills arriving from the festive season and in these situations insolvency becomes the only way out.”
In addition to the huge levels of debt that have been accrued over the Christmas period there are many other factors that will help to nudge insolvency levels up further this year. Many people are struggling with mortgage repayments due to high interest rates, despite interest rates having been cut in December. Energy costs are set to rise by up to 20% in the first few months of the year, which will push household finances up further. The cost of food and petrol is on the up, which is also putting a strain on household finances. And the effects of the credit crunch simply are not helping.
One official stated: “Personal insolvency numbers will move forward at a much faster pace than anticipated. While they may settle down before next Christmas, they will do so having edged closer to a total of 120,000 personal insolvencies for 2008. With the credit crunch yet to fully bite, there are simply not the conditions in place to expect a drop.”
Consumers are urged to remember that the effects of insolvency can be long lasting, and therefore action such as an IVA or bankruptcy should not be taken lightly. Those looking for advice in relation to their debt problems can contact the Citizen’s Advice Bureau or one of the UK’s debt charities for further advice on alternatives to insolvency.
- Don’t look upon insolvency or equity as an excuse to get into debt A recent report from the Personal Finance Research Centre has suggested that many people in the UK may be looking upon equity or insolvency opportunities as an excuse to get into high levels of debt,
- Drop in insolvency numbers A recent report has shown that the number of people that are being declared insolvent in the UK has fallen across England and Wales. The third quarter of the year saw a drop of 3%
- Debt management firms may be able to write off debt As most people are aware the level of personal debt amongst consumers in the UK is very high, and with borrowing costs rising, the cost of living on the up, and increases in a range
- Bankruptcy hell during first few months of the year Some experts have stated that the frivolous spending that many consumers indulged in over the Christmas months will now result in bankruptcy hell over the first few months of this year, with the first three
- Bankruptcies could be fuelled by Christmas spending Many consumers in the UK are still taking stock of the amount of money that they have spent over the Christmas period, and industry officials are now concerned that the level of overspending by some
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