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According to figures released by the Insolvency Service, 27,488*
people went into bankruptcy or entered into an Individual Voluntary
Arrangement (IVA) in the quarter ended 30 September 2008, an increase
of five percent compared to the same quarter in 2007.
* More homeowners reschedule debts as credit crunch bites
* Interest rate cut may relieve pressure on homeowners
* KPMG predicts 150,000 personal insolvencies in 2009
According to figures released by the Insolvency Service today, 27,488* people went into bankruptcy or entered into an Individual Voluntary Arrangement (IVA) in the quarter ended 30 September 2008, an increase of five percent compared to the same quarter in 2007.
The figures show that personal insolvencies, when compared to the same period the year before, rose for the first time since the second quarter of 2007.
KPMG predicts that this will be the first of a series of quarterly increases as the economic downturn gathers pace, leading to record levels of personal insolvencies in 2009, despite the dramatic cut in base rates yesterday.
Mark Sands, Director of Personal Insolvency at KPMG said:
“The downturn and the associated increases in unemployment are starting to have an impact. This is being seen not only in the increase in personal insolvencies but also in the related issues of increased mortgagee possessions and the greater use of charging orders by unsecured lenders who have not been paid.
“Whilst consumers will fight to keep their family homes, and both lenders and the courts have systems in place to ensure that possession is the last resort, once the property is sold there is often little reason for someone with other significant debts not to declare themselves bankrupt.”
Reflecting on the people seeking IVA protection Sands said “KPMG has reviewed a large proportion of the IVAs put forward over the past year and we have identified a trend. Consumers with a mortgage now make up 45 percent of those seeking help, a dramatic increase from the 30 percent level seen last year. Consumers are yet to see the benefits of falling interest rates as their mortgages continue to eat up more of their income. Mortgage deals continue to be difficult to obtain, and unsecured lending has tighter restrictions than for many years. As a result, more consumers with mortgages and additional unsecured debt are turning to IVAs to help them reschedule their credit card and loan repayments to relieve the pressure and enable them to pay their mortgage to keep a home for their family. Many more homeowners will be hoping that yesterday’s 1.5% reduction in base rates will relieve the pressures on the household budget before they too need to resort to an IVA”.
Bankruptcies have increased year on year whilst IVAs still show a slight fall. Explaining this difference Sands noted: “Concerns raised about the inappropriate use of IVAs did have an impact on their numbers, but this was addressed by the introduction of the IVA Protocol in February 2008. Since then we have seen a slight increase in the use of IVAs. Nonetheless, our research shows that only one third of new IVAs are taking advantage of the new approach and that 17 percent of all IVAs put forward in the last quarter were rejected. As these factors recede we expect to see IVAs increase in the year ahead.”
The data prepared by KPMG also showed that the average debt owed by someone entering an IVA in the last quarter was £48,400 and that in the same period more than 500 people entered into an IVA with debts in excess of £100,000.
-ENDS-
Further information:
Judith Dow, KPMG Corporate Communications
Tel: 0207 694 8584 Mobile: 07786 197 718 Email:
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KPMG Press Office: 0207 694 8773
Notes to editors:
*Throughout this announcement we refer to non- seasonally adjusted figures from the Insolvency Service
About KPMG:
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