Costs of going bankrupt increasingly unaffordable
Monday 8th August 2011
According to the second quarter figures for 2011 released by the Insolvency Service, 30,513 people went into bankruptcy or entered into an Individual Voluntary Arrangement or Debt Relief Order between April and June 2011.
That is an overall decrease of 12.2% compared to the same quarter in 2010.
Chris Nutting, Director of Personal Insolvency at KPMG, said: “While we have seen the bankruptcy numbers (11,113) fall from their dizzying peak in 2009, we are seeing a slight increase in the number of people entering alternative formal personal insolvency procedures such as an IVA or DRO in the last quarter compared to the same quarter last year. We estimate that current levels of personal debt are causing 120,000 people a year to use some form of insolvency procedure to resolve their financial problems.
“Our own research has found that over-indebtedness is also leading to an increase in the number of households setting up informal arrangements with creditors – such as debt management plans – in an attempt to settle debts. If you combine informal arrangements with the insolvency figures, there may be as many as 250,000 people a year setting up some form of arrangement with their creditors.”
He added: “While we expect to see more people turning to the insolvency regime to remedy their debt troubles, debtors will find it increasingly difficult to find the money to petition for their own bankruptcy as costs have gone up 15% in the last year.
“The cost of bankruptcy petitions went up in June 2011 and, combined with the increase in court fees, it will now cost a debtor £700 to file his own petition; up from £600 in April 2010. My concern is that there will be a lot of people who will not be able to afford to declare themselves bankrupt. Creditors will work with debtors to resolve the individual’s debt problems but sometimes a formal insolvency procedure is the only sensible solution for all parties.
“In these financially straitened times it is imperative that debtors take appropriate advice when seeking help with their financial problems. I would encourage people to speak to their creditors at the earliest opportunity to discuss their concerns before the problem spirals out of control.”
