The number of people claiming insolvencies is set to sky-rocket, according industry experts.
The Insolvency Service's latest report shows that there were 33,935 individual insolvencies in England and Wales during the third quarter of 2010. Whilst this may seem an astronomical figure, it's actually down when compared to the same period of the previous year.
The individual insolvencies were broken down as follows:
- Bankruptcies - 13,907
- Individual Voluntary Arrangements (IVA) - 12,960
- Debt Relief Orders (DRO) - 7,068
Even though the majority of the figures are down when compared to last year, experts are warning that this could be 'the calm before the storm' if people don't tackle their debt problems before Christmas and New Year. This is especially important with all the news of job losses, tax increases and benefit cuts in the coming years.
Kevin Still, director of Atlantic Financial Management, said: "Whilst IVAs are up by nearly 5% from the same time last year, there seems to be a welcome reduction in the levels of personal insolvency across the UK. But this may be the lull before the storm with so many public sector workers due to be made redundant in the next few years.
"Clearly consumers are still struggling to juggle their finances and what has particularly not helped is the rise in interest rates on credit cards which will have impacted those using a number of cards to pay their debts. We can be fairly certain that things aren't going to get any easier for families facing debt issues, especially with Christmas on the horizon and the threat of mortgage repayments increasing if Bank of England interest rates rise early in the New Year."
Speaking out on the potential of various debt solutions, Mr Still said it was 'crucial' that the indebted take some control before their income is squeezed further: "Whether that's through a Debt Management Plan (DMP) or for those with debts of more than £15,000 and at least three creditors, a formal debt solution such as an IVA," he said. "A DMP or an IVA aren't a quick fix for those in debt. They need serious consideration as they can impact an individual's ability to secure a finance agreement in the future. But they can provide the right solution for those with substantial debts with a number of creditors.
"The key is to grasp the nettle and deal with debt problems before they run out of control. With so many factors on the horizon that will impact income and outgoings in the coming months, those in debt really cannot afford to delay."
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