UK Bankruptcies Skyrocket

The number of people declared insolvent in England and Wales in the third quarter of 2005 has hit a record high, after rising for seven quarters in a row.

According to the Department of Trade & Industry, figures showed 17,562 personal insolvency cases, up 46% on a year ago, including 12,043 bankruptcies. The rising trend has led to 60,102 individual insolvencies in the last year.

So why are us Brits going bankrupt?

• There is a higher level of debt than ever before.
  
• Credit is more readily available than ever before.

Says Insolvency expert, Pat Boyden, from Price Waterhouse Coopers,

“Last year we went through the £1 trillion barrier, with the amount we owe on mortgages, credit cards and personal loans. Well it is 12% more in the last 12 months.”

“The increase in bankruptcies is a reflection of the amount we've borrowed."

• There are climbing unemployment rates.
  
• Attitudes toward debt have shifted. Going bankrupt is no longer as taboo as it once was.
  
• The law has changed: Since April 2004, anyone declared bankrupt has to wait one year (instead of the previous three years) before being discharged from bankruptcy, thanks to the Enterprise Act (2002).

Although it is still not particularly enjoyable to go bankrupt, having your debt slate wiped clean in 12 months is more favourable than having to wait three years (and be unable to get credit, mortgages, run a company during that time).

Individual Voluntary Arrangements (IVAs)
There has also been a sharp rise in the number of Individual Voluntary Arrangements (IVAs), an alternative solution to traditional bankruptcy (which have doubled in the past year).
In the third quarter of 2004, 5,519 people elected IVAs to settle their debts.

Corporate Insolvencies
And it’s not just individuals going for broke.

The number of companies going bust is also climbing in the UK. In the third quarter of 2004, 3,389 firms in England & Wales went into liquidation. That’s a rise of 14% since the same period the previous year.

According to Price Waterhouse Coopers, this is due to:

• The level of corporate debt
  
• Declining consumer demand for goods
  
• Increased regulation
  
• Rising costs, especially fuel.

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