Number of People Moving Towards Bankruptcy has Hit an All Time High

Posted 2008-01-2

Nearly 130,000 people are moving towards bankruptcy this year, reports accountants KPMG. This is mainly due to their over spending over the Holiday season.

The main causes of this problem has been an increase rate in mortgage payments as well as high credit card bills. If you compare it to 2007, the number was just under 110,000.

KPMG further stated that in all probability these people would be declared as bankrupt or would either take out IVA’S what is known as Individual Voluntary Arrangements. These IVA’s give people a chance to pay banks and credit card firms just a portion of their debts and then wipe the slate clean and start over.

With the lending practices getting tougher, people in financial difficulties, maybe heading towards insolvency, as these people cannot manage without loan consolidation or transferring their debt to a new low interest credit card.

KPMG’s, Mark Sands looking at the way things have been in the past, says it’s not really tough for people who are already in debt or with loan consolidation, or with second mortgages to borrow money. As such, this extra credit has been a life saver for these people.

He further adds, that in future this extra credit won’t be made available to many people. Nearly half of the new credit card applications have not gone through. It’s nearly 30% higher than before the beginning of the credit squeeze.

Increase in interest rates are one of the main reasons for those in debts as well as homeowners whose fixed mortgages are going to be terminated, concludes Mr. Sands. So high are the interest rates that it is this section of people who are burdened with increasing repayments, that have to shell out an additional 400 to 1390 pounds on a 150,000 mortgage.

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