Deloitte: 2010 Official Bankruptcy Figures May Hit 137,000
Although the number of individuals in UK that have filed for bankruptcy in the third quarter of 2010 is likely to go down from 13,907 to the 13,000 mark, Deloitte said the rising cost of declaring insolvency may bring up official figure of debt recovery orders and Individual Voluntary Arrangements (IVAs).
Louise Brittain, partner in Deloitte’s Contentious Insolvency team, said despite the seeming slowing down of personal insolvency levels, “they remain stubbornly high, reflecting the seriousness of the UK personal debt problem.”
According to Brittain, the tendency that people would resist addressing their debt problems during Christmas up to New Year could be reflected in the decline of bankruptcy figures for the fourth quarter of 2010. Subsequently, insolvency declarations in the first quarter of 2011 is expected to soar higher.
“2010 was a difficult year for consumers, with growing numbers of individuals filing for personal insolvency. Increasing utility bills and the VAT hike mean inflation is unlikely to fall back to its two per cent target until at least 2012. This will bring added pressure to cash-strapped households as pay rises are likely to be far below inflation for many years,” Brittain said.
Brittain told purchasers who paid for “big ticket items” late last year through their credit cards to pay off their purchases before the VAT increases to avoid “accumulating high interest repayments which would erode the benefit of purchasing products.”
“IVAs and/or bankruptcy are a much better alternative to debt management arrangements which are unregulated and place severe financial pressures on individuals over a 10-20 year period,” Brittain added.