Card Debt

Bankruptcies up too ..

In England and Wales 107,000 people were declared insolvent. This was a 59% increase on 2005. Insolvencies are also rising in Scotland and Northern Ireland but at a slower rate. Experts do not expect such a rapid increase this year, but the upwards trend is likely to continue.

The number of bankruptcies rose by 34% to 62,900. If declared bankrupt then the debtor loses all their assets, including their home, and the proceeds are used to pay creditors. Bankruptcy is the traditional way to become insolvent and ends after one year.

However, the other way to deal with overwhelming debt is to enter an Individual Voluntary Agreement (IVA). In this case an insolvency practitioner oversees an arrangement between the debtor and their creditors. Some of the debts are paid in one go and others over several years. The debtor is less likely to lose their home and there is less stigma than becoming bankrupt. The sharp rise in insolvencies last year was largely due to the increasing number of people opting for an IVA. The figure more than doubled to 44,300.