The year 2005 saw as many as 70,000 people rendered insolvent. Easy availability of credit, softer bankruptcy rules and slow growth are some of the factors held accountable for this steep increase.
/24-7PressRelease/ - LONDON, UK, February 08, 2006- Insolvency in the UK showed a steep annual rise of about 57%. Nearly 20,461 insolvencies were recorded in England and Wales during the first quarter of 2005.
Nearly 66% of the insolvents declared bankruptcy while the rest took out Individual Voluntary Arrangements (IVAs) wherein debtors agreed to pay a stipulated sum to their creditors each month in return for freezing the interest charges.
Not only this, a sharp increase has been recorded in mortgage repossessions also. About 18, 784 mortgage repossession court orders were passed in the year 2005.
A number of factors have been attributed to this sharp rise in insolvencies in the UK. Experts believe that softer bankruptcy laws may have prompted people to opt for bankruptcy as a means to patch up their finances. Now anyone who is declared bankrupt has to just wait for one year instead of the earlier three years before being discharged.
Slow growth, unemployment, life changing events such as divorce, ill health may also be accounted for the recent changes, but by far the most important reason is the recent credit boom in the UK.
With the availability of all sorts of credit be it loans or mortgages being so easy in the UK, more and more people are borrowing without assessing their repayment ability. The result of course is insurmountable debt.
People in UK are choosing personal insolvency as a way out of debt. However, if the current trend of easy availability of credit continues, insolvency may touch 100,000 in 2006.
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