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Bankruptcy could reach alarming high

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New Insolvency Service statistics have shown that the number of Britons edging towards bankruptcy will swell dramatically as borrowers fail to seek proper help from their creditors.

The figures reveal that 130,000 people entered into formal debt arrangements, such as debt relief orders, individual voluntary arrangements (IVA) and bankruptcy, over the last year, while 35,000 declared insolvency in the final three months of 2009.

But R3, the association of business recovery professionals, has reportedly said that the figures are “only the tip of the personal debt iceberg”.

According to R3, the actual number of people struggling with debt is four times higher than the Insolvency Service has claimed, at 961,000.

R3’s study of almost 65,000 consumers found that a further 574,000 people have contacted their creditors informally for help with payments, while an estimated 500,000 are in debt management plans, not recorded by the Insolvency Service.

Worryingly, additional statistics from the Consumer Credit Counselling Service (CCCS) have revealed a 93% increase in insolvency recommendations given by the debt charity in the past 12 months.

“Although there have recently been positive signs in the economy, our figures highlight the high numbers of people with unmanageable debt, for which insolvency is the most appropriate solution,” said Delroy Corinaldi, CCCS Director of External Affairs.

Consumers have been warned to be vigilant with their spending over the coming months as government rhetoric about the country’s emergence from the recession should not signal a return to more frivolous times.

“Although it can seem scary, being honest with creditors is a helpful step and can prevent formal insolvency in the long run,” advised R3’s President, Peter Sargent.


Written by Andrew Hodges

February 10, 2010 at 6:39 pm

Posted in Comment, LinkedIn

Tagged with , ,

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