Debt-Advice-Forum-UK

[Admin]

The number of individual insolvencies fell by 3% to 26,072 from the previous three months and were 5% down on last year. Bankruptcies fell by 2.1% to 15,833, while Individual Voluntary Arrangements (IVAs) went down by 4.3% to 10,239.

The number of home repossession orders made by courts in England and Wales also declined by 1% in the previous quarter. In the past 3 months, the total dropped to 23,806.

However, there have been many warnings by experts that repossessions will increase by about 50% in 2008. The Council of Mortgage Lenders (CML) predicted that repossessions may increase to 45,000 by the end of 2008.

Furthermore, the number of mortgages with 3 months arrears or more is also expected to increase by 17% to 170,000.

CML said many homeowners will be struggling to keep up with increasing mortgage repayments. Mark Sands of accountancy firm, KPMG, said this would push up the personal insolvency figures.

This is the third consecutive quarter that the amount of people going bust has declined. The decline reflects the fact that credit card borrowing has dwindled said Pat Boyden of accountants PricewaterhouseCoopers. He added that a decline has been noted in the last 2 years so the insolvency figures have levelled off.

However, bankruptcy levels are still 2.2% higher than 12 months ago, IVAs are now running 14% lower than compared with the same period last year.

An insolvency expert at accountancy firm Deloitte said this is primarily due to the fact that firms which specialise in arranging IVAs are more cautious. IVA specialists have been under considerable pressure to be more prudent about the cases they take on.

[Brin]

The fall in insolvency numbers is misleading. Bankruptcies are actually up by 2% compared to a year ago, it is IVAs, whee there has been a fall of about 14%, that have effected the overall figures.

The fall in IVAs is because of the dispute between TIX, who represent the banks and credit card companies, and Insolvency Practitioners. As personal debt is still growing at 10% pa, five times the rate of growth of the economy and inflation, there are huge debt problems out there. This spat between TIX is, I believe, just an attempt by the banks to defer charging huge bad debt provisions to massage their results at a time when they are suffering large write offs from the credit crunch.

It is just a fudge of the banks' share prices! Just imagine what falls their shares would have experienced if they had written billions more off for personal debt provisions (llok in any of the financial press, banks' shares are taking a hammering).

In essence the banks want people to go into DMP (because they do not raise provisions against customers' debts in DMP) rather than IVA or bankruptcy (where they do raise provisions). It is just cynical management of the banks' reported profits.