Insolvencies: 'The Worst Is Yet To Come'

Insolvencies: 'The Worst Is Yet To Come'
By Sky News SkyNews - 18 minutes ago

Government figures are expected to show today that the number of people declared insolvent remained flat during the first quarter of the year - but it may not stay that way.

There are warnings that these figures are likely to be the calm before the storm, with numbers forecast to rise in the second half of the year.

Mark Sands, director of personal insolvency at KPMG, said: "The credit crunch will take its time to filter through to the ordinary individual, but by the end of this year we will see record levels of personal insolvency."

The Insolvency Service is likely to say that around 15,000 people went bankrupt during the first three months of this year, with a further 9,000 taking out individual voluntary arrangements (IVAs), according to KPMG.

These figures would be broadly in line with ones reported for the previous quarter, but would be considerably lower than for the same period of 2007, with IVA numbers dropping by around 25%.

Pat Boyden, partner in the Business Recovery Services practice at PricewaterhouseCoopers, also expects the figures to get worse in the coming months.

He said: "A lot of people have been able to borrow their way out of problems and those opportunities are gone now."

He is expecting a slight rise in the number of people declared insolvent, but a fall in the number of IVAs arranged.

Mr Boyden says this drop in IVAs, under which interest on debt is frozen in exchange for a set amount being repaid each month, is likely to reflect people looking for other answers to their debt problems.

He said: "Banks are trying to avoid people going on to IVAs and they are looking for other solutions, such as debt management plans."

He added that many so-called IVA factories had exited the market, while there had also been a fall in television advertising for the arrangements.