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Finance News |
Inexorable Rise in UK Bankruptcy Figures Set to Continue Says KPMG
The number of people made bankrupt has risen again, according to figures released by the Department of Trade and Industry.
This is the fourth consecutive quarter showing a dramatic year on year increase. The October – December 2004 statistics represent a 29% increase on the same period last year and a 6% increase on the previous quarter (July-Sep 04).
The DTI figures show that 35,898 people were made bankrupt in 2004, the highest annual level since records began and a massive 28% increase on 2003 totals.
Separate figures released by the DCA (Department of Constitutional Affairs) confirm another trend – the increase in bankruptcies is being driven by people declaring themselves bankrupt, rather than being forced into bankruptcy by a creditor. In the last year, 75% all bankruptcies were people bankrupting themselves the highest proportion ever, and more than double the rate of only 4 years ago.
Steve Treharne, head of Personal Insolvency at KPMG commented:
"These statistics point to a new high level of bankruptcies becoming the norm rather than a one-off spike fuelled by changes in the law as was predicted when the bankruptcy legislation changed in April 2004. I believe we can expect to see annual rates of 60,000 bankruptcies in the UK within the next three years. If the UK follows the US trend, where bankruptcy rates ‘per head’ are 10 times UK figures, we can expect greater still increases.
"The increase in bankruptcy levels suggests that the simplified approach to bankruptcies is making the procedure more attractive to debtors. As word spreads of the post Enterprise Act regime, more and more people are likely to take this route.
"The small increase of 6 % on the previous quarter’s figures compared to the dramatic increase on the previous year probably reflects a change in the law that no longer allows certain student loans to be written off by bankruptcy. This came into effect in September last year so students can no longer take advantage of this loophole!
"These new levels are impacting debtors and creditors alike; as is the new approach to bankruptcy brought into effect by the Enterprise Act."
Steve Treharne concludes: "The simplified bankruptcy process is making it more attractive to debtors. In particular, the early discharge from bankruptcy, potentially after only a few months, allows a debtor to quickly restart his financial life and reduces the stigma attached to bankruptcy. This meets the government’s aim of rehabilitating debtors and encouraging them to contribute once more to the economy.
"Creditors’ views unsurprisingly differ from those of debtors. Creditors await the outcome of recently announced plans to ‘name and shame’ culpable bankrupts by pursuing bankruptcy Restriction Orders introduced in the Enterprise Act. The Orders allow a Court to place restrictions on a bankrupt for up to 15 years."
Source : Creditman - UK
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