More people go bust as the debt tide rolls in
A record number of people went bust in 2006, with a 59% increase in insolvencies on the year before to 107,000 from 67,500 – with expectations that the trend will deepen during 2007.
The rise was as a result of the big increase in people taking out individual voluntary arrangements (IVAs), whereby debtors have some of what they owe cancelled out and have to repay the rest over a set period of time.
The number of personal insolvencies also went up in Scotland and Northern Ireland, although not by as much as in England and Wales.
Last year also saw the number of house repossessions rise, with defaulting mortgage holders being hammered by the county courts in response to increased pressure from lenders.
The Department of Constitutional Affairs said that 91,200 repossession orders were made in 2006 – a rise of 29% from 2005, although only half are carried through, with the remainder suspended.
However, there has been a sharp rise in bankruptcies – where there is a danger of debtors being forced to sell their home – as a harder attitude has been discernible amongst some lenders which suspect many people taking out IVA s are not as financially distressed as they claim.
Sue Edwards of Citizens Advice said: “There are thousands of people who have substantial debt and will never be able to pay it off.”