UK bankruptcies at all time high
The first quarter of 2009 has seen a record number of bankruptcies and experts have warned that that if the trend continues, a record number of Britons could go bankrupt this year.
Over 150,000 people could go bankrupt before the end of the year, well ahead of the previous record of 107,000 in 2006. The number of people going bankrupt the first quarter of this year has reached over twenty thousand, 23% more than the same period the year before. If you include people who have signed up to Individual Voluntary Agreements to avoid full bankruptcy this figure rises to over thirty thousand.
Despite these grim numbers financial specialists predict the year will only get worse. Even if recession passes, the number of individual and business bankruptcies will still continue to rise until long after the economy has calmed down. Pat Boyden of PwC business recovery services stated: “What may be interesting is that in the 1990s recession, bankruptcies continued to increase for nearly three years after the worst of the recession had passed. If that is the case this time, we may be seeing record figures every quarter until 2012.”
Debt Relief Orders (DROs) are thought to be one of the reasons in the rise of people declaring insolvency. Introduced last month, the service allows people with debts of less than ?15,000 and few assets to the write their debts off without the problems of declaring a full bankruptcy. To qualify this service you must have a disposable income of less than ?50 a month.
Despite the large amount of people going insolvent it is advisable to take careful consideration before making a decision such as bankruptcy. Stephen Speed, Chief Executive of The Insolvency Service said: ?Bankruptcy must not be seen as an easy option for those who have contributed to their own problems. There are sanctions for those bankrupts whose behaviour can be seen as reckless, wilful or culpable and where debtors can pay something towards their debts, The Service will ensure that they do pay.”
Figures in Scotland are even higher than those seen in England with a 71% rise in insolvencies compared to the same period last year. However, a similar scheme to the DRO has been running in Scotland for some time and can explain some of the inflated figures.