Personal Debts Increase Yet Again

Following on from yesterdays article, whilst corporate insolvencies appear to be falling, unfortunately personal insolvency is hitting record levels.  New figures from the insolvency service have shown that well over 35 thousand people were declared insolvent in the final 3 months of 2009, this was a huge increase of 25% on the same period in 2008.

The increase is even larger if you compare the year as a whole to 2008.  A total of 134,142 people were declared insolvent throughout the year, up 26% on 2008 and smashing the previous record set in 2006 at 107,288. 

One of the main increases in personal insolvency was in the number of people entering Individual Voluntary Arrangements (IVAs), these were up 26.3% from Q4 of 2008 to the same period last year.  IVAs are when an individual agrees with their creditors that they cannot afford to pay the money that they owe, so come to an arrangement where they will only pay a set proportion of the debt based on what they can actually afford.

This increase is thought to be due to increase creditor aggression as they chase some form of payment for the money owed when people simply don’t have the capital to pay. A statement from Louise Brittain of Deloitte has said,
"This is a result of increased creditor pressure which is unlikely to let up any time soon, and highlights the desperate financial difficulties facing individuals."

She also stated her surprise that the increase came at that time due to peoples tendency to not deal with any acute debt issues until Christmas is over. It is also thought that the increase in IVAs may be due to the fact more people have chosen to cut back working hours in favour of being made redundant, this has given at least some funds to apply for an IVA instead of going into bankruptcy.

Despite finally leaving recession, there are still many negative theories about the near future for people finances.

“We expect to see the numbers continue to rise as the upwards trend in personal insolvencies traditionally continues for nearly three years after the worst of a recession has passed," said Pat Boyden, from accountancy firm PricewaterhouseCoopers.

Posted at 09:00AM Feb 06, 2010 by Kris Wigfield in Insolvency  |  Comments[0]