The number of people declaring themselves insolvent is on the increase, even though the economy is said to be clawing itself out of recession.
And with mortgage interest rates predicted to start rising soon, experts at Dyke Yaxley said the news gave some cause for concern.
Government figures show that 27,029 people in England and Wales became insolvent between April and June, a rise of more than five per cent on the same time last year.
The increase was driven by a 20 per cent rise in the number of Individual Voluntary Arrangements, which were introduced in 1987 to help people avoid having to declare themselves bankrupt.
Tony Elliott, Dyke Yaxley’s Senior Tax Planning Consultant, said: “This is not a time to be scaremongering – there is some good news in this report too, with the number of company liquidations having actually decreased over the last quarter.
“But it does seem that a personal insolvency crisis could be on the horizon if people are not careful about managing their debts.
“As the economy starts to grow, people are more confident to start stretching themselves once again, and people seem to be using IVAs to write off relatively small debts, of four or five thousand pounds.”
Tony said there were signs of improving business confidence and rising market demand, which was underpinning a greater willingness among firms to employ more people.
“That is good news, although the other side of the coin is that creditors, including banks, are more likely to ask for their money back as the property market continues to recover.
“For now, let us welcome the strengthening recovery, rising wages, record employment figures and increased retail spend, but add a note of caution that people should always seek early advice if they find themselves with money worries.”
Dyke Yaxley’s Tony Elliott
