Don’t be fooled by insolvency fall

Date: 5 February 2008

LEADING North West chartered accountants and business advisors, Mitchell Charlesworth, is warning people not to be complacent with their spending in 2008 following a surprise fall in insolvency figures.

Recent figures, released by the Insolvency Service, show that the number of individuals declaring themselves insolvent has dropped by 0.6 per cent to 106,645 from a record high of 107,288 in 2006.

Despite this 24,846 people were still declared insolvent in the final quarter of 2007, which was a fall of 3.9 per cent on the previous quarter and a massive 16.4 per cent fall on the same period in 2006, and 2008 looks to be a year were many people may find themselves struggling.

Jeremy Oddie, partner and head of corporate recovery and insolvency at Mitchell Charlesworth, said: “It is extremely likely that we will see a rise in these figures by the end of 2008 due to rising fuel costs, travel expenses and council tax demands. Not to mention the fact that thousands of homeowners will be coming to the end of fixed rate mortgage deals this year.

“Many people who have traditionally borrowed their way out of debt with loans and by borrowing against housing equity will struggle to do so as lenders are becoming a lot more stringent in their borrowing criteria and as house price rises continue to slow many people will find that they have no equity to tap in to.”

Recent reports have highlighted that one in 10 adults spend more than they earn every month and are relying on credit cards and overdrafts to plug the gap. This has been recognised by credit card companies who are now making it much harder to obtain credit.

Jeremy said: “People really do have to live within their means from now on and spending on non-essential purchases, like second holidays and other luxury goods will have to be curbed in order for people to give themselves a fighting chance in 2008. It seems that over the past few years the UK has been in the grips of a ‘spendemic’.

“If you have concerns about your finances, the first thing that you should do is make a list of all your debts so that you know what you are dealing with; the Mitchell Charlesworth website has a handy, free, debt calculator that can help you do this. If you feel that you may struggle to repay your debts contact a debt specialist immediately who should be able to help.”

The number of people taking out Individual Voluntary Agreements (IVA’s) also fell in the final quarter of 2007 to 9,188.

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