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COMMENT
According to a leading firm of accountants, a record number of people will become bankrupt during 2006. Grant Thornton has warned that almost 20,000 people will become either bankrupt or personally insolvent in the first three months of next year. Alas, overspending on credit and store cards during December will be the straw that breaks the camel's bank for many overstretched households. Grant Thornton reckons that the Christmas spending spree will signal the end for 6,500 (almost a third) of these unfortunate folk. Although personal bankruptcy and insolvency figures go all the way back to 1960, the latest figures from the Department of Trade and Industry show that financial collapse is now a booming industry in the UK. Indeed, between July and September 2005, there were 12,000 bankruptcies, up 31% on the figure for the third quarter of the previous year. What's more, in the same period, 5,500 entered into individual voluntary arrangements (IVAs), up a staggering 95% on the number for Q3 2004. Wow, that's some growth trend! Although bankruptcies currently outnumber IVAs by 69% to 31%, Grant Thornton predicts that this ratio will fall to 65%/35%, or under two to one. As for 2005, Grant Thornton predicts that personal bankruptcies and insolvencies will top 66,000, which is an all-time record in itself. This huge surge in insolvency is partly due to a relaxation of the bankruptcy laws in April 2004, but a massive increase in personal indebtedness is the root cause of the problem. As I warned recently, Britain has become a nation of credit junkies: excluding mortgages, over three million of us have debts of £10,000+, and 252,000 people owe £50,000+. Some homeowners' problems have already begun: in the third quarter of this year, mortgage possession orders made soared by two-thirds (66%), reaching 19,687, compared to 11,862 in Q3 2004. Of course, bankruptcy or insolvency doesn't happen suddenly -- it's a gradual process. Often, it begins by spending more than you earn, borrowing to make up the difference, then robbing Peter to pay Paul, continuing to struggle to make ends meet, borrowing more (perhaps consolidating existing debts and securing them against your home) and so on. Eventually, if you continue along this route without taking evasive action, the whole house of cards comes tumbling down and you're finished, financially speaking. Then again, it doesn't have to be this way. Indeed, the earlier that you seize the nettle and turn the tables on your debts, the faster that you can get out of debt, and go on to become a smart saver or intelligent investor. These articles will help you to do just that: Good luck with ditching your debts! More: Get help in our Getting Out Of Debt centre and our Dealing with Debt discussion board.
