Personal Insolvencies Rise Again

The first quarter of 2007 saw 30,075 people go bust, an increase in personal insolvencies of 23.9% on the same period one year ago, according to figures released today by the Insolvency Service. Whilst bankruptcies rose 10% to 16,842, Individual Voluntary Arrangements accelerated by 47.6% over the past 12 months to 13,233.

Commenting on the figures, Damon Gibbons - Chair of Debt on our Doorstep - said:

"That over 30,000 households in a single three month period have had to resort to extreme measures and declare themselves insolvent reflects a severe indebtedness problem in this country. We should remember that every county court judgment, insolvency, and respossession increases the market for high cost credit as people are excluded from mainstream financial services. The challenge for Government is to ensure that people going insolvent are given a way back into the financial services mainstream as soon as possible. In that respect, the growth of IVA's as opposed to full bankruptcy is perhaps the only good news in these figures."

Insolvencies Continue to Rise

The latest statistics from the Insolvency Service reveal that nearly 30,000 people went bust in the final quarter of 2006 - a further increase of 7% on the previous quarter and up by over 44% on the same period a year ago.

The majority of insolvencies were bankruptcies (17,063), which accelerated (up over 9%) their growth on previous quarters as the numbers of people entering IVA's started to steady (12,741 in the quarter and a rise of only 4% on the previous period), which may indicate that the harder line on IVA's being pursued by the credit industry whereby proposals of anything less than 40p in the £ are starting to be rejected, maybe back-firing on lenders as debtors are forced into bankruptcy as an alternative.

Damon Gibbons, Chair of Debt on our Doorstep commented:

"These figures demonstrate that the UK's debt problem shows no sign of abating. The results of lax lending policies in previous years are really starting to come home for the credit industry, with over 100,000 individual insolvencies in 2006. The rate of growth in the last year has been staggering and the Government needs to urgently review its plans to prevent over-indebtedness in the UK. On this evidence, the plan isn't working."

Debt on our Doorstep has previously highlighted the need for much stronger regulation of the industry to prevent irresponsible lennding, full data sharing by lenders to ensure proper assessment of a borrowers total indebtedness, placing a requirement on the credit industry to take proper account of ability to pay before making a loan, and requiring the financial services industry to support the provision of debt advice services through a statutory levy.