More choose bankruptcy
THE number of people declaring themselves bankrupt rose by 22 per cent in South Devon at the end of last year, compared with the same period the previous year.
And there has been a big increase in the proportion of people with mortgages who are choosing bankruptcy.
Half of the 155 new cases declared in the final quarter of 2008 in the Torquay and Newton Abbot County Court are consumers with a mortgage — a dramatic increase from the 30 per cent in the same period of 2007.
The statistics show a 22 per cent increase in people petitioning for their own bankruptcy, as opposed to being forced into bankruptcy by a creditor.
The figures released by the Ministry of Justice show that nationally the increase was 32 per cent in England and Wales, compared to the same quarter in 2007.
For the same period there was an increase in the use of Individual Voluntary Arrangements (IVA) which rose 12 per cent compared to the previous year.
Administrators KPMG's analysis of the latest official insolvency figures shows that nationally 15,358 people successfully petitioned the court to bankrupt themselves and 10,467 agreed an IVA in the quarter.
John Bangham, director of personal insolvency for KPMG's Plymouth office, said: "This means that a total of 25,825 people took the potentially life changing step of placing themselves into personal insolvency; this proportion of people choosing to 'jump before they were pushed' represents an incredible 85 per cent of all personal insolvencies."
He added: "Consumers with a mortgage now make up 51 per cent of those seeking help, a dramatic increase from the 30 per cent level seen last year. However, with property prices falling many consumers have little or no equity in their homes and may be unwilling to commit to a five year repayment plan to reschedule their credit card and loan repayments at a time of such great uncertainty.
"We therefore expect bankruptcies and Debt Relief Orders (a new alternative to bankruptcy which will be introduced in April) to form an increasing proportion of personal insolvencies."
The data prepared by KPMG also showed that the average debt owed by someone entering an IVA in the last quarter was £47,800 and that in the same period more than 500 people entered into an IVA with debts in excess of £100,000.
Falling house prices, the general downturn and the associated increases in unemployment are starting to have an impact, says KPMG. While consumers will fight to keep their jobs and their family homes, for those who lose both and have substantial debts there is often little reason not to declare themselves bankrupt.