Worrying figures

Bankruptcy and insolvency figures have been kept continuously low since 1960 and the news that the numbers have never been higher is another blow to the confidence of an already nervous economy. 

According to the figures 19,062 filed for bankruptcy from the beginning of the year to the end of March,, which is up around a quarter from the same time period in 2008.

Sadly for those concerned, this isn’t the end of the bad news, with the figures also showing a further 10,713 people having taken out an Individual Voluntary Arrangement (IVAs) in the same time.  When combined these figures signal a new high since records began.

The news was even worse in Scotland, with figures released by The Scotsman suggesting that nearly 600 Scots had slipped into bankruptcy in the three months, which is a staggering increase of 71%.  According to experts the reason for the substantially higher insolvency figures north of the border reflects the ease with which people can declare themselves legally bankrupt.

The so-called low-income-low asset rules, or Lila’s, were introduced last year to enable individuals to claim bankruptcy more easily when their debts became insurmountable.  A Lila scheme was introduced to the rest of the UK last month, so it is likely that the next quarter’s results will see a comparable jump in the rest of the country.

"With unemployment currently at the two million mark and the collapse of many owner-managed businesses the level of personal insolvency is likely to rise in the coming months," said Mike Gerrard from Grant Thornton Accountancy.

"We expect to see the trends continue, particularly the rise in bankruptcies, as the recession bites. In the 90s' recession, bankruptcies continued to increase for nearly three years after the worst of the recession had passed. If that is the case this time, we may be seeing record figures every quarter until 2012," adds Pat Boyden from PricewaterhouseCoopers.

What can be done?

For people struggling with serious debts, bankruptcy, while one option, is amongst a number of things that can be done to get back on to the right track.  As well as the afore-mentioned IVA's, in which the person in debt will make a formal agreement with a creditor to pay back a set amount that is agreed upon by the creditors comes a legal guarantee that the further outstanding debts will not be chased up.

Another option is to try and get a debt consolidation loan, which will allow the individual to combine each separate debt into an individual debt.  For those with large debts and a poor credit rating though, it may be only possible to get a secured loan, which obviously entails the risk of losing your home.  For those with smaller debts or a good credit rating, a personal loan, would still be possible.