Personal insolvencies set to soar

by Gill Montia

Story link: Personal insolvencies set to soar

KPMG is predicting a sharp rise in the number of personal insolvencies in England in Wales during 2009.

The professional services firm estimates that up to 150,000 people will either be declared bankrupt or enter into Individual Voluntary Arrangements (IVAs) or Debt Relief Orders (DROs) during the course of the year.

DROs are being introduced in April and are aimed at people who have less than £15,000 in debt, less than £300 in assets and less than £50 per month to repay their debt, after all their essential expenditure is covered.

The surge in people going bust could set a record high for the Insolvency Service’s figures, which were first collected in 1960.

For creditors, it could mean writing off at least £1.1 billion in consumer debt.

This year, KPMG expects the figures to be broadly in line with 2007, with 105,000 people the subject of legal arrangements over their debts.

Those subject to IVAs proposed to repay an average of 38% of the total owed in 2008, also in line with 2007.

The average amount owned by someone entering an Individual Voluntary Agreement was down slightly in 2008, at £47,800 compared with £50,300 last year.

However, KPMG estimates that more than 2,500 people entered into IVAs this year with debts exceeding £100,000.

The analysis by the accountancy and recovery firm does not cover Scotland, where different legal arrangements apply.