Bankruptcy levels reach record high

Posted 2008-01-2

KPMG estimate that a record 130,000 Britons will file for bankruptcy in 2008, an increase of more than 20,000 compared to 2007. Huge festive period overspending, rising mortgage payments and high credit bills are believed to be the main factors in the problem.

These people will either declare bankruptcy or take out Individual Voluntary Arrangements (IVAs), which allow people to repay part pf their debts to credit provider s and start again.  Those in difficulties, who struggle financially without consolidating their debt or move debts from one low credit product to another, may find themselves closer to insolvency due to tightening lending practices.  

Previously, easy credit helped people already debt; with credit cards second mortgages and consolidated loans available. With stricter lending policies, these lifelines are no longer available to indebted people. KPMG found that half of new credit cards applications are being rejected, up from 30% prior to the credit squeeze.

Mark Sands of KPMG said:

“High interest rates are also responsible for people spiralling towards debt and homeowners [facing difficulties] whose fixed rate-mortgages expire.  This group of people face soaring repayments, for example, around an additional £400 a month to £1390 on a £150,000 mortgage.

Leave a Reply