Personal bankruptcies are rocketing.
Figures from the Department of Trade and Industry (DTI) this week are expected to show that more people are being declared insolvent now than at the height of the 1992 recession.
Capital Economics has forecast that there were 14,700 bankruptcies in the last quarter, 45 per cent more than in the same period last year.
KPMG partner Steve Trehame warned: “We could see the number of bankruptcies this year reach 60,000. At the moment we are running at 40,000.”
Trehame blamed cheap credit for the phenomenon. “For a number of years we have had fairly easy access to credit, low interest rates and an ill disciplined British public,” he said. Bankruptcy law changed in April 2004, making it quicker and more straightforward for individuals to declare themselves bankrupt.
Previously it took three years to complete the process. Now it takes a year at most to come out of bankruptcy and sometimes as little as four months.
Trehame said: “You can now fill your bankruptcy form in online, it’s a lot easier.”
He added that while the process is more straightforward, the bankrupt’s duties to creditors are virtually unchanged.
Bankrupts work out a deal to pay creditors back part of their outstanding debt and their slate is not wiped clean until the repayments are finished.