Mr Average Bankrupt celebrated his 42nd birthday last week. He (and 58 per cent of bankrupts are men) lives in an insolvency hot spot, such as Wales or South West England.
He is determined to find a job this year. It was the shock of being made redundant two years ago that kicked off his financial difficulties.
He did own a modest home and was paid a decent wage and, while he was working, felt financially secure. But once the pay stopped and he failed to find another job, he found it ever more difficult to manage his finances.
He has said that he didn’t mean to get so deeply into debt, but, after he set up a loan for the car, took out a personal loan for a holiday and applied for a couple of low-interest credit cards, the bills started to pile up.
Whenever he ran out of money, he simply popped any purchases on his credit cards. After all, he calculated his assets, including the equity in the house, were worth £24,000. Yet by last September, he worked out that he owed a total of £61,000 to six different financial institutions.
Advertisement
It didn’t take him long to decide what to do. He wasn’t unduly worried about applying for bankruptcy, as he reasoned that plenty of people were in the same boat.
He knew he would be discharged within a year and it would mean an end, finally, to the piles of demand notices that covered his mat every morning.
Mr Bankrupt is just one of the 12,997 people who filed for bankruptcy between October and December last year.
A further 2,662 were forced into bankuptcy by their creditors while 9,188 people applied for an individual voluntary arrangement (IVA), allowing them to pay off a portion of their debts without going bankrupt.
In total, 24,846 people became insolvent, down 3.9 per cent from the previous quarter and a fall of 16.4per cent compared with the same period in 2006.
Advertisement
Experts said that this trend was likely to be reversed in the coming months.
A recent spat between banks and IVA companies led to a sharp decline in people entering into the payment schemes, nearly 30 per cent over the year, as banks refused to accept the terms of the deals.
The banks said that debtors were paying too little and IVA companies were taking too big a cut of the payments.
This dispute was resolved days ago and is likely to lead to a sharp increase in IVAs in 2008.
Mike Gerrard, head of personal insolvency at Grant Thornton, said: “Take no heart from this quarter’s drop in personal insolvencies. From here on in, it’s going to be a rough ride for many individuals and the numbers going insolvent will rise.”
Advertisement
Corporate insolvencies are also set to rise faster in coming months, experts said. The number of companies going bust rose by 0.3 per cent in the fourth quarter of 2007 compared with the quarter before, although it fell by 2.1 per cent year on year.