64. Bankruptcies reach another record

The number of people going bankrupt in England and Wales has hit another record high during the first three months of 2005, official figures show.

The Department of Trade and Industry said the number of individual bankruptcies reached 10,091.

The number of bankruptcies was 24.5% higher than a year ago and up 2.8% on the previous quarter.

Worries about debt levels have been growing and accountants KPMG said a "black cloud of debt" hung over the UK.

Struggle

Company liquidations fell 1.3% on the previous quarter to 2,900 the DTI figures showed, a drop of 7.4% on the previous year.

Total individual insolvencies reached 13,229 in England and Wales during the first quarter.

Of these, 3,139 were Individual Voluntary Arrangements (IVAs) - an alternative to bankruptcy which allows debtors to come to an agreement with their creditors. The number of IVAs was up 40.1% on the same period in 2004, but down 2.1% on the previous quarter.

The level of consumer debt broke through the £1 trillion level last year, and there are growing worries at the number of people who are getting into major difficulties with their finances.

Accountancy firm KPMG said that the latest figures meant 37,886 people have been made bankrupt in the year to 31 March, a 30% increase on the previous 12 months.

"These figures... do prompt the question of where this is all going to end," said Steve Treharne, head of personal insolvency at accountancy firm KPMG.

"It is interesting that these statistics are released just over a week after official government figures reveal there has been a 35% increase in mortgage possession actions on the same period last year.

"If the current trend continues, we could see annual rates of 60,000 bankruptcies within the next three years."

Bankruptcy 'more attractive'

The five interest rate rises since late 2003 have been cited as one reason for the surge in the number of bankruptcy cases.

And some experts have also argued that recent changes to bankruptcy laws have made people more willing to choose bankruptcy as a way of sorting out their finances.

Under the Enterprise Act 2002, since April 2004 bankrupts in England and Wales have been able to come out of bankruptcy faster than previously.

KPMG said that more than three quarters of bankruptcy cases came from people declaring themselves bankrupt rather then being forced into it, a move it said was down to the changes in the law.

"In many people's eyes, this Act made bankruptcy a far simpler and more attractive proposition and removed some of the stiffer penalties previously meted out to bankrupts in the UK," Mr Treharne said.

However, Sue Edwards, senior social policy adviser at Citizens Advice, said easy access to credit was to blame for the rise, rather than changes in the law.

"People are borrowing too much, and lenders are making poor lending decisions," she said.

Vocabulary:

individual voluntary arrangement –( IVA) - индивидуальное добровольное соглашение: договор, который заключает неплатежеспособное лицо со своими кредиторами и по которому данное лицо обязуется в течение некоторого периода времени (обычно 5 лет) выплачивать определенную сумму долга, а кредиторы соглашаются не предпринимать каких-л. действий по аресту его имущества, доходов и т. п.

Enterprise Act 2002 – комплекс реформ относительно неплатежеспособности