According to recently released government statistics, person
insolvencies in England and Wales have hit a new high, up by
nearly 50% on this time last year.
The figures, published by the UK's Department of Trade and
Industry (DTI), recorded 17,562 cases of personal insolvency,
for the third quarter of 2005, which included over 12,000
bankruptcies. This represents an increase in every successive
quarter in the last seven.
Although the DTI didn't report directly on the causes of the
rise, some insolvency experts believe that the rise can be
explained by higher levels of debt in society as a whole, and
people's attempts to deal with a growing debt problem.
IVA 's (Individual Voluntary Arrangements)
Most of the rise in individual insolvencies has been caused by
people seeking IVA's, a voluntary procedure increasingly taken
as an alternative to bankruptcy where borrowers reach an
agreement with their creditors to pay a monthly sum and a large
amount of debt is written off. At the same time, further
interest and charges are not added to the total amount owed.
The number of IVA's has nearly doubled in the last 12 months,
with 5,500 people using this method to resolve their debt
problems in the last 3 months.
Changes in the Bankruptcy Law
Recent changes to bankruptcy law in England and Wales, the
Enterprise Act (2002), came into affect last year, where people
no longer had to wait 3 years to be discharged after they were
declared bankrupt. After April 2004, this period was reduced to
just 12 months, and many commentators feel that this has
encouraged more people to come forward and seek bankruptcy as a
means to solve their debt problems.
Many analysts expect the number of personal insolvencies to keep
rising into 2006, as unemployment levels increase.
The DTI statistics for the third quarter of 2005 are available
from their website:
http://www.dtistats.net/sd/insolv/
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