According to a recent report there was a dip in the level of insolvencies in the last quarter of last year, but many experts have branded this drop as simply the calm before the storm. Although personal insolvencies in England and Wales did see a significant fall compared to a year earlier during the last quarter of 2007, it is thought that a combination of factors will result in a surge in personal insolvencies as 2008 continues.
A report from the Insolvency Service suggest that an increasing number of people are filing for bankruptcy of their own accord rather than on the advice of professionals and creditors, and this is because they are realising that the level of debt that they are in has reached crisis level. The dip in insolvency levels at the end of 2007 was one of 16.4% compared to the last quarter of 2006, with around 25000 insolvencies during the final three months of last year.
The effects of the credit crunch, tighter credit conditions, higher food, energy, and petrol prices, and high mortgage repayments are all expected to affect the level of personal insolvencies that take place this year.
One industry professional stated: ‘We are forecasting small increases in unemployment as the economy slows, so we would expect the insolvency data to pick up over the course of 2008. There is also a risk that the effects of the credit crisis will exacerbate the magnitude of any future increases, as subprime borrowers struggle to refinance loans as they roll off more favourable deals.’
A new protocol with regards to IVAs has also been launched by the industry, and this could also lead to more people being accepted for IVAs, which could add to the figures.
Popularity: 39% [?]