thenextwave

UK personal insolvencies still climbing

Posted in debt, economics, social, trends by thenextwavefutures on 5 May, 2007

Data from the Insolvency Service shows that the number of personal bankruptcies in England and Wales has again increased year on year in the first quarter. A couple of interesting trends: these are record figures, but the rate of increase is slowing, but second, creditors seem less willing than they have been to allow debtors to go into an IVA, under which they can write off part of the monies outstanding.

The figures show that just over 30,000 people went bankrupt in the first three months of 2007, up almost a quarter on the same period last year, but only a small increase on the final quarter of 2006, according to a news report on the BBC website. (Full data can be found here).

The total amount of consumer debt in the UK is £1.3 trillion – about the same as a year’s economic output. £1.1 trillion is tied up in mortgages, and the other £200 billion pounds is unsecured credit (such as credit card loans and bank loans). £200 billion represents about £4,000 for each adult in the UK, but it’s not evenly spread.

In 2006, according to the Bank of England, 42% of households had no debt at all ( down a couple of percentage points on 2000; 14% had only secured debt (down 4 points); 22% had only unsecured debt (up 7 points since 2000); and 21% had both – pretty constant right through from 2000 and back to 1995.

UK type of debt by household, 2006

The Bank asked people if they had experienced difficulties with their debts; but found no shift since 1995. But in their article they noted that aroud 40 people per thousand (4%) said they had difficulties, but only around 2 per thousand filed for bankruptcy. Although some evidence suggests that people have reined in their credit in response to higher interest rates, the Bank’s observation also suggests that if interest rates continue to climb there’s some scope for increases in bankruptcies among theose who have most debt relative to their income.

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