66% more Brits insolvent
There has been a 66.3 per cent leap in the number of people declaring themselves bankrupt and insolvent compared with last year.
Between April and June this year 26,021 people either went bankrupt or took out an individual voluntary arrangement (IVA) with their creditors.
The bulk of this number were bankruptcies - with almost 15,000 people being declared bankrupt. This is 33 per cent more than the same period last year, although a fall of 3.3 per cent when compared with the first three months of the year.
By comparison the number of IVAs has soared 35 per cent since the start of the year and a stunning 153 per cent compared with the same time last year. Between April and June more than 11,000 people took out an IVA.
IVAs are legally binding contracts between a borrower and all of their creditors to repay them only what they can realistically afford with the balance of their debt being written off.
Typically creditors agree to waive interest on debts in return for receiving regular payments each month over a set period, normally around five years, with monthly payments calculated on the person's income and expenditure.
"IVAs continue to grow as a proportion of individual insolvencies, currently accounting for 43 per cent, and are set to overtake bankruptcies in the next couple of quarters," said James Falla, of debt consultancy Thomas Charles.
"Total individual insolvencies in England and Wales for the calendar year 2006 look certain to top 100,000."
However, despite the massive rise in bankruptcies and IVAs, Mr Falla pointed out that the current numbers could be just "the tip of the iceberg".
"Yesterday's quarter percent increase in interest rates puts added pressure on people in debt and, if unemployment and inflation continue to rise, then the situation could look very grim indeed."
Figures out yesterday from Thomas Charles reveal that some 1.1 million Britons class themselves as "likely" to become insolvent.
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