Tuesday, 30 December, 2008
The coming year will witness a dramatic leap in the number of people going bust south of the border with a record number of personal insolvencies likely. Specialists at KPMG reckon that as many as 150,000 people will be the subject of legal arrangements ranging from insolvency to bankruptcy in England and Wales in 2009 as the toll of casualties of a long debt-fuelled spending binge mounts.
The prediction by the accountancy giant does not cover Scotland, where different legal arrangements can apply when individuals run into trouble repaying debts. Economy watchers have highlighted the fact that the retail and property markets have been stronger in Scotland than south of the border in 2008. Some suggest this partly reflected the fact most home-owners in Scotland had not borrowed as heavily to fund house purchases as people in areas like southern England.
The Scottish labour market has also out-performed the UK average. However, the prediction that thousands of people in England and Wales will find that they over-extended themselves during a period when the boom-and-bust cycle had supposedly been consigned to the history books will strike a chill in many hearts.
As KPMG research indicates that creditors will have to write off at least £1.1bn in bad debts owed by consumers in England and Wales in 2008, the analysis will also concern businesses across the country. With experts warning that as many as 600,000 people could lose their jobs in the UK in 2009, much worse could be in store.
KPMG predict that in 2009 more than 150,000 people will enter into an Individual Voluntary Arrangement, be declared bankrupt or agree one of the new Debt Relief Orders which will be introduced in England and Wales in April.
In 2008 they estimate that 105,000 people will enter IVAs or be declared bankrupt, in line with 2007. IVAs allow people to agree a repayment plan with creditors under which they will pay a percentage of their total debts. The average IVA debtor owed £47,800 in 2008, compared with £50,300 in 2007. However, Mark Sands, director of personal insolvency at KPMG, noted debt levels ranged from around £20,000 to more than £100,000. More than 2500 people entered into IVAs with debts exceeding £100,000 this year.
"Most IVAs deal with personal loans, credit card balances and other unsecured debts. Most of this money was borrowed to meet current' expenditure including lifestyle items such as holidays, or to meet monthly shortfalls in the household budget, rather than to acquire assets or to fund a business," said Sands. In 2008 people subject to IVAs proposed to repay an average of 38% of the total due, in line with 2007. In Scotland, people can strike agreements with creditors through Protected Trust Deeds.
Source: http://www.manchestereveningnews.co.uk/
