Bankruptcies in the UK are expected to reach record levels as more individuals choose to avoid the debt trap, a task now made easier by the liberal bankruptcy laws.
According to official figures, the number of personal insolvencies is likely to grow by over a quarter. Bankruptcy petitions from creditors increased 23 percent to 5,419 and the number of debtors’ petitions also increased 27 percent.
By the yearend there would be as many as 46,000 bankruptcies exceeding the previous record number - 36,794 in 1992 the year of the recession.
Analysts said the huge rise in personal bankruptcies was due in parts to the climate of easy borrowing and to bankruptcy laws becoming more relaxed. The government slashed the discharge period – when a bankrupt cannot have a normal financial life - from 3 years to one in 2002. According to the law, creditors settle for part repayment of all outstanding debts after which the bankrupt debtor has a ‘clean slate’.
Consequently, more individuals were taking advantage and declaring themselves insolvent rather than face their debts. The number of insolvents this year included a significant percentage of young people.
The total outstanding debt from consumer credit now stands at £190.5bn.
Posted
on : Mon, 31 Oct 2005 12:10 GMT | Debt News
By : Mark Richardson
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