As fears grow consumer borrowing may have spiralled out of control a total of 23,351 become bankrupt or entered into an Individual Voluntary Agreement (IVA).

This represents the highest ever number of personal insolvencies in England and Wales in a three-month period, according to data released today by the DTI Insolvency Service.

The record growth in IVAs continues with a 141.9 per cent increase compared to the same quarter last year, showing the ongoing popularity of the IVA process with debtors as a way to resolve their financial problems. In total, 7,961 people entered into an IVA arrangement in the first quarter of 2006.

Bankruptcies also continue to rise, reaching more than 50,000 in the last 12 months – the first time this threshold has been reached. They increased by 51.2 per cent when compared to the same quarter in 2005 and by 11.1 per cent compared to the last quarter of 2005.

These figures signify a worrying trend – as unlike IVAs, where dividend prospects for creditors are greater because it involves a longer-term commitment to pay debts – bankruptcies do not offer the same returns to creditors and have longer-term implications for individuals.

Nick Reed, director in the business recovery services practice at PricewaterhouseCoopers LLP in Yorkshire, said: "We are paying the price for a spend now, worry later culture.

"Record personal insolvencies are the result of a debt culture which has become endemic in the UK. Our own research shows that spending more than you have is now the number one cause of personal financial failure.

"Some people are now so in debt that they are using credit to buy everyday items, like groceries and possible interest rate rises could worsen the situation further. We expect the rate of growth in personal insolvencies to remain high and easily surpass the 100,000 mark in 2006."

The Insolvency Service figures also point to the emergence of a strong corporate rescue culture in the UK. Data for the first quarter of 2006 shows that 1,057 companies used rescue procedures such as administrations, company voluntary arrangements and receiverships in England and Wales.
This is the first time that numbers have reached more than 1,000 in one quarter and is a 35 per cent increase on the figures for the first quarter of 2005.

There were 753 administrations in Q1 2006, the highest in one quarter for many years.

Overall, there were 4,621 corporate insolvencies in the first quarter of 2006, a 21.8 per cent rise when compared to the first quarter of 2005.
This included 3,564 company liquidations in England and Wales in the first quarter of 2006, which is an increase of 12.4 per cent on the previous quarter and 18.4 per cent up on the same period in 2005.

The retail sector remains an area of concern, with 215 liquidations in the last quarter of 2005, representing a 22.8 per cent increase on the same period in 2004.

-Yorkshire Post Today