One family to be made bankrupt every four minutes as credit crunch forces more cash-s

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One family every four minutes will be plunged into bankruptcy or another type of personal insolvency this year, experts warned yesterday. The rise will be fuelled by soaring household bills, poor pay rises and a lack of cheap loans

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Re: One family to be made bankrupt every four minutes as credit crunch forces more ca

One family every four minutes will be plunged into bankruptcy or another type of personal insolvency this year, experts warned yesterday.
The rise will be fuelled by soaring household bills, poor pay rises and a lack of cheap loans.

Accountants KPMG predicted at least 130,000 Britons would lose their battle with their debts this year - a record-breaking 355 a day, or one every four minutes.

Official figures from the Insolvency Service yesterday showed 25,264 insolvencies between January and March. There were 15,651 bankruptcies and 9,614 Individual Voluntary Arrangements, which is when people make a deal with their creditors.

But experts said this is "the calm before the storm" with the numbers set to explode, even into 2009. It can take a year or more before those struggling with debt reach the point of insolvency.

Mark Sands, KPMG's director of personal insolvency, said debt had reached 'horrendous' levels. The average debt of somebody taking out an IVA is nearly £50,000 - excluding their mortgage.

More than 500 had debts "in excess of £100,000", typically built on credit cards and personal loans. Many frittered the money away and tried borrowingon one credit card to pay the bill on another. The credit crunch means that this is no longer possible, or will be much more expensive to do.

Falling house prices and Britain's mortgage drought also means people can no longer use their homes as a "cash machine", Mr Sands said.

Mike Gerrard, a personal insolvency partner at accountants Grant Thornton, said "the worst is yet to come".

He added: "Where once over-indebted individuals relied on remortgaging or extended limits on credit cards to stave off bankruptcy, these methods have now been largely shut off because of global financial pressure. This means insolvency proceedings become a reality much quicker.

"Life is always tough for those with serious debt problems. The credit crunch is managing to amplify those problems even more."

•The number of companies going bust rose 54 per cent in the first three months of this year, the figures also revealed. In England and Wales, 858 companies went into administration, compared to 557 in the previous quarter.

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Re: One family to be made bankrupt every four minutes as credit crunch forces more ca

Not surprising since it's so easy to declare bankruptcy nowadays. Also, the credit was so easy to get in the past few years that people have been living beyond their means.

- Hamad Lone, Britain
If someone wants to be a "good time Charlie" by borrowing money then they get everything they deserve when the bailiffs come calling.. We get this every 10-15 years. I don't think they should be allowed to go bankrupt to avoid their debts. They borrow for pleasure, they should pay back with pain. "Live for today and you only have one life" is a reasonable attitude if you are wasting your own money but to borrow to do it, payback time will always be waiting for the returns due.

- Donald A Merritt, Watford Herts
Many of the people you mention have seen a huge increase the value of their homes over the past 10 years and spent the equity as they went along. Now its crunch time and its everyone else fault except their own. I appreciate there are quite a few "innocents" in all this but many had the time of the lives and the day of reckoning is coming.

- Mike, Bristol
Back to basics, I think. Live within your means and try to avoid credit. I also think that by introducing some sort of home finances into the curriculum in all schools could help.

- Lydia, Bournemouth
Brown has relied on easy credit to help maintain the "feel good factor" which has kept Labour in power for so long.
The chickens are now coming home to roost, and if you borrowed to fund a lifestyle in excess of your financial ability, tough.

- Joeking, Lancs
Its a national disgrace that the government must take some responsibility for (it does not happen in countries with different fiscal and economic policies). The human cost is erroneous and its an economic disaster; with so many lives in chaos how can we have a strong economy?

- Jane, Oxford
Where's Ocean Finance when you need them?

- Brian Roberts, Plymouth Devon
When my Wife and I were married - 1954 - there was not the debt there is nowadays, because people did without until we saved enough money to get what we wanted. Of course, in those days, inflation was not as great as now.

The first home we could buy was a three-bedroom semi-bungalow which cost £5,000 - and that wasn't until 1968, when I was 38 - (thought we'd never be out of debt!).

I believe one of the causes of high house prices is that Margaret Thatcher allowed tenants to buy their council houses, which led to increasing the cost of owning a home.

We bought our present house in 1986 and since then (22 years) it has increased in value by over five times! Wish my income had gone up by that much!

- Lionel B, Dundee, GB
I have been predicting this catastrophe for the last ten years, as many of my acquaintances will confirm with eyes upraised. But to me it was pretty obvious that the bubble was due to burst. How could our economy survive with the big spender attitude that has existed. One up-manship and selfishness were bound to rip the bottom out of the gravy train.

- Jim Dingwall, Edinburgh, Scotland
They can blame no but themselves, no one made them borrow money they could not aford. At the end of the day it's greed, to keep up with the Jones's.

- J Sandy, Alanya
Unfair to simply blame individuals caught like this. Of course some have been knowingly irresponsible.
But for the majority they were given bad advice, manipulated by banks and other financial companies.

Until very recently the word 'debt' disappeared, replaced by 'credit.' This concealed the truth. A whole generation has grown up lacking the very idea of debt.
People were bombarded with "advice" by banks and other financial companies to transfer debt to another credit card, or get loans against property.
How are most people who are not educated in finance, to comprehend that this was very bad advice?

Both Conservative and Labour governments loosened controls on banks and financial services, allowing them to prey on the ignorant majority. Hence tragedy for countless families who have been cynically milked as cash cows - and are now being abandoned.

Banks are protected from their stupidity by the State, but not their victims.

- Shan Morgain, Newport S Wales, UK
The whole credit crunch situation was created by greedy bankers looking to boost their own pay and bonuses so it is hardly surprising that, given the present economic circumstances and downturn, that more and more are likely to declare bankruptcy.

- Kenneth, Suffolk, England
The chickens are coming home to roost for Gordon Brown, people have been living off debt for years, but with the basic costs of living soaring they are NOW having to get another card to pay the interest on the first one, A merry go round.
Debt is ok until the country goes into recession.
What people need is a decent wage, not to have to live off debt!

- Christine Abram, England
Bankruptcy is a joke these days. People are just spending willy nilly and don't care if they cant afford to pay it back because they just go bankrupt. If you are a victim of circumstance and have to go bankrupt then I have every sympathy but a lot aren't, they are just plain greedy and cant make do without their flash cars and fancy holidays.

- Joanne, Lancashire
Banks don't force people to borrow money. Borrowed money has to be paid back.

- Dee, Merseyside