Insolvency figures to show rise
Updated on 05 November 2008
Government figures being released on Friday are expected to show the start of a rise in the number of people being declared insolvent.
As the economic situation deteriorates, unemployment rises and credit conditions remain tight, insolvency practitioners are predicting the beginning of an upward trend in the number of people unable to keep up with their debts.
Personal insolvency levels are expected to jump sharply during the second quarter of next year and continue increasing to reach a record high for the whole of 2009.
Mark Sands, director of personal insolvency at KPMG, said figures for the three months to the end of September were likely to show that 27,000 people were declared insolvent during the period, up from 24,553 during the previous quarter.
He expects around 17,000 people to have been declared bankrupt, 4% more than in the second quarter and 9% more than during the same period of 2007.
A further 10,000 are likely to have taken out an Individual Voluntary Arrangement, under which interest on debt is frozen in exchange for a set amount being repaid each month, 6% higher than during the previous three months but 6% down on the third quarter of last year.
But he said that while these figures would be a "slight tick up" on the previous quarter, the number of personal insolvencies was likely to soar during 2009 to reach record levels.
Mr Sands said: "We expect that by the end of 2008, personal insolvencies will reach up to 110,000, as the credit crunch continues to limit the options available to consumers hard hit by increased household costs.
"During 2009, we think this figure is likely to dramatically increase to 150,000, as factors such as rising unemployment also start to take hold."
As well as the deteriorating economic situation, the sharp rise will be driven by the introduction of a new form of insolvency, known as a debt relief order, which will come into force in April next year and is aimed at people who owe £15,000 or less.
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