Personal Bankruptcy Filing Down 12.2% in Q2 2011
The number of people who engaged in bankruptcy filing in the second quarter of 2011 has reduced by 12.2 percent compared to the same period in 2010, according to the second quarter figures for 2011 released by the Insolvency Service.
A total of 30,513 people went bust or entered into an Individual Voluntary Arrangement (‘IVA’) or Debt Relief Order (‘DRO’) between April and June 2011.
On the other hand, a statistics released by accounting firm Johnston Carmichael revealed that the number of corporate bankruptcy filing in Scotland for the last two quarters hit 1365, the highest number of insolvencies ever recorded and amounting to four companies going bust every day.
Chris Nutting, Director of Personal Insolvency at KPMG, said there has been 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” despite bankruptcy numbers (11,113) falling from their “dizzying peak in 2009.”
“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,” Nutting added.
A research conducted by KPMG’s Personal Insolvency division showed 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, 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,” Nutting said.
“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,” Nutting added.
The cost of bankruptcy filing inched up in June 2011. 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,” Nutting said.
According to him, creditors will work with debtors in resolving 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,” Nutting concluded.
“I would encourage people to speak to their creditors at the earliest opportunity to discuss their concerns before the problem spirals out of control.”