The number of people becoming insolvent has jumped by almost three quarters during the past year, Government figures have shown.
A record 23,351 people in England and Wales became insolvent during the first three months of the year, 73pc more than during the same period of 2005, according to the Insolvency Service.
Within this total, the number of people declared bankrupt hit a new high of 15,389, 51pc more than during the same period last year.
The main area of growth in people becoming insolvent was in Individual Voluntary Arrangements (IVAs), under which interest on debt is frozen in exchange for an agreed amount being repaid each month for a set period, which soared by 142pc to 7,961.
But the figures did show a slight slowdown in the overall rate at which people were being declared insolvent. The total number of bankruptcies and IVAs was up by 13pc quarter on quarter, compared with a growth rate of 15pc during the three months to the end of December.
Consumers owe £1.18 trillion through mortgages, credit cards, loans and overdrafts. And more people are struggling to keep up with these debts, with debt advice lines reporting more people contacting them.
But debt charity the Consumer Credit Counselling Service (CCCS) said it believes much of the increase in the number of people becoming insolvent was due to consumers having a better idea of where to go for help.
A CCCS spokeswoman said: "About 5pc to 6pc of people who take on debt get into real difficulties and that has stayed the same for quite a long time. I think the increase is more likely to be because people know where to go for help, particularly the 142pc increase in people taking out IVAs.
"They are now much more heavily advertised than they were two to three years ago."
Attitudes to bankruptcy have also changed in recent years, with the process no longer having the stigma it once did.
The Enterprise Act has reduced the time it takes for someone to be discharged from bankruptcy from three years to just one year, which may also have made it a more appealing option for those struggling with debt.
People are also more aware of the alternatives to bankruptcy, such as taking out an IVA, with the schemes now being the subject of multi-million pound advertising campaigns.
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May 9 2006 Evening Gazette |
