Loans Scotland

Bankruptcy statistics always get the interest of the press mainly because they are dramatic. So for example a record number of people petitioned to go bankrupt in 2007! Woooooooooooh! In England and Wales a total of 53,114 people petitioned to bankrupt themselves after being unable to keep up with their debts, as opposed to having their creditors call for them to go bankrupt, according to the Ministry of Justice (aka Staatspolizei). The figure was just under 1 per cent higher than the number of people who asked to go bankrupt in 2006, but it was a 44 per cent jump on the total for 2005 and 2007 figures were nearly double 2004’s level.

But there was a dip in bankruptcy petitions from debtors during the final quarter of the year, with just 11,703 people asking to go bankrupt in the three months, the lowest level since 2005 and 10 per cent down on the same period of 2006. At the same time the number of creditors who petitioned for people to be made bankrupt also fell during the final quarter of 2007 to 4,614, 11 per cent fewer than during the last three months of 2006 and at the level last seen in 2004.

Why did they drop? Here’s a theory. With banks being hammered by “subprime” maybe they decided to reduce the amount of bad debt on their books by calling it good debt! In other words they cut their customers some slack and gave them more time so that their own figures would look a little better. By not pursuing customers to bankruptcy they avoid the stigma of increasing their allowance for bad debt.

If this is the case then maybe we will see the figures rise again precipitately in 2008.

Anyway… is bankruptcy the statistic we should focus on? Nope more helpful is savings ratios which really demonstrate what people are doing with their money. As savings ratios go down we know that people are essentially borrowing from their future!

Firms that offer IVAs in England and Scotland are considering withdrawing services that help citizens set up IVAs. Financial services companies are increasingly unhappy about paying upfront fees and also want to restrict IVAs from becoming an easy option for debt-laden consumers. For creditors, an IVA can mean only recovering 30% of outstanding debt so they have an interest in ensuring that only really insolvent consumers can access them.

As personal debt continues to rise along with personal bankruptcy, it will be interesting to see how this market continues to shake out.