Bankruptcies rise to record levels
The number of people declaring themselves bankrupt has soared to record levels, new figures show.
The Department of Trade and Industry’s (DTI) statistics reveal that 17,562 people in England and Wales were declared insolvent during the third quarter of 2005, a 46 per cent year-on-year increase.
Of these, 12,043 were declared bankrupt, while 5,519 agreed to Individual Voluntary Arrangements (IVAs), which is an alternative to traditional bankruptcy.
The DTI said the reasons for the exponential rise remain unclear.
But Jill Hankie, of the Bankruptcy Advisory Service, attributed the record rise to the increasing availability of credit and an increase in sub-prime lending – when financial companies lend money to those who would not otherwise be eligible for credit.
“It is easier now to obtain credit than it has ever been,” she told Wake Up To Money.
“You just need to look at the number of credit cards that have flooded the UK market and the easy availability of personal loans.”
She also believes that reform of bankruptcy laws last April have made people less reluctant to declare themselves bankrupt.
The period of bankruptcy was reduced by the government from three years to 12 months, meaning that within two to three years of a bankruptcy order, borrowers can now receive a normal rate of lending again.
Shadow trade and industry secretary David Willetts said the figures showed the economy’s growth rate was falling, and accused the government of “mismanagement”.
“Too much of the economy’s growth over the past few years was fuelled by personal borrowing and now families are paying the price for Gordon Brown’s mismanagement of the economy,” he declared.
Mr Willetts added: “There is a personal tragedy behind each one of these insolvencies and there is a failure of economic management revealed by these economic statistics as a whole.”
