Insolvencies decrease in lull before storm
by Gill Montia
Story link: Insolvencies decrease in lull before storm
The level of personal insolvencies in England and Wales decreased in the latter part of 2007 but the trend is not expected to continue into 2008.
In the fourth-quarter of last year, 25,000 people became insolvent, 16.4% less than in the same period of 2006.
The decrease takes the 2007 total to slightly less than the record figure of 106,645 set in 2006.
However, the credit squeeze, a new insolvency regulatory code that came into practice at the beginning of February, and the possibility of a slowing economy are all factors that could lead to a sharp rise in insolvencies this year.
Individual Voluntary Arrangements (IVAs) are an alternative to bankruptcy but in recent months, banks have been arguing that too many debtors are unable to stick to the terms of an IVA, and have refused large numbers of applications.
In the last three months of 2007, the number of IVAs applied for decrease by almost one-third on the same period in 2006.
With this in mind, Mark Sands, director of personal insolvency at KPMG the financial services firm, is forecasting that insolvencies will exceed 130,000 during 2008, because people in chronic debt are now taking the initiative in making an application.
Requests by debtors have been increasing steadily since 1998 (when they stood at 50%) to around 80%.
Meanwhile, online bank, Egg, has withdrawn 161,000 credit cards from customers whose credit profiles have apparently deteriorated since the cards were issued.
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