Insolvency levels to remain flat
Updated on 01 August 2008
Government figures are expected to show that the number of people declared insolvent during the second quarter of the year remained flat.
Around 25,000 people are thought to have been unable to keep up with their debts during the three months to the end of June, as the credit crunch helped reduce the rate at which people are borrowing money, according to KPMG.
Within the total the number of people being declared bankrupt is expected to have risen by 7% compared with the previous quarter to 17,000, although this would still be down on the record of nearly 18,000 seen during the first quarter of 2007.
But just 8,000 consumers are thought to have taken out Individual Voluntary Arrangements (IVAs), under which interest on debt is frozen in exchange for people repaying a set amount each month.
This figure would be 9% lower than during the first three months of the year and 26% below figures for the second quarter of 2007.
Mark Sands, director of personal insolvency at KPMG, said one reason why insolvencies are likely to have remained flat is that people are taking on less debt as a result of the credit crunch.
He said that while tighter lending criteria were making it harder for people to borrow their way out of debt, the restrictions were also forcing them to get help at an earlier stage and at a time when they owed less.
But he added that the flat figures could also be the "lull before the storm", adding that personal insolvencies could still rise to record levels during the coming quarters.
PricewaterhouseCoopers also expects insolvencies to be flat this quarter, but it said they were likely to begin increasing over the coming six to 12 months as consumers increasingly had to borrow money to meet their day-to-day living costs.
The group added that even though insolvencies were likely to be flat this quarter, they were still at a historically high level.
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