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'Perfect storm' for insolvencies

Personal insolvency levels are being pushed up by a “perfect storm” of rising unemployment and the debt mountain taken on by consumers.

A record 130,000 people are expected to be declared insolvent in England and Wales during 2009 and insolvency practitioners think more people have already gone down this route during the first 10 months of 2009 than in any previous calendar year.

Mark Sands, national head of bankruptcy at Tenon Recovery, estimates that 107,689 people had been declared bankrupt or taken out an Individual Voluntary Arrangement or Debt Relief Order by October 28.

The figure is higher than for any calendar year on record and beats the previous high of 107,288 insolvencies seen during the whole of 2006.

Mr Sands said: “I expected this year to be the worst on record but even I have been stunned by the level of personal insolvencies - we have sailed past the previous record and still have more than two months of the year to go.

“At this rate we expect to see as many as 130,000 personal insolvencies over the whole of 2009, an increase of 22% on the levels seen in 2008.”

Mr Sands attributed the soaring rate of personal insolvencies to a combination of the credit boom and the economic downturn.

People took on record levels of debt in the run up to the credit crunch, often borrowing money to fund their lifestyle, with total household borrowing standing at £1.459 billion at the end of September, or which £229 billion was unsecured.

Many consumers were also stuck in a cycle in which they borrowed money on credit cards, later taking out a loan to consolidate their debt and finally unlocking equity from their home to repay it.

This was posted in Bdaily's Members' News section by Ruth Mitchell .