Consumer debt crisis set to propel rise in personal insolvencies
SPIRALLING problem debt has caused a jump in personal insolvencies, RSM has warned.
The accountancy firm has predicted that official figures set to be released on Friday will show that around 25,250 people entered a personal insolvency process in the third quarter of 2017, an increase of nearly seven per cent year on year and over three per cent quarter on quarter.
RSM forecasts that 3,800 of the third quarter’s insolvencies will be bankruptcies, 15,150 will be individual voluntary arrangements (IVAs) and 6,300 will be debt relief orders.
It expects this trend to continue into next year, with a particular spike in IVAs among younger people.
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“Last week, the Financial Conduct Authority revealed that over four million people in the UK are in financial difficulty, having failed to pay domestic bills or meet credit commitments in three or more of the last six months,” said Alec Pillmoor, personal insolvency partner at RSM.
“This is extraordinary when you consider the country’s unemployment rate is at its lowest level since 1975.
“Meanwhile, unsecured household borrowing continues to rise in double digit figures while stagnant wages are failing to keep up with inflation.
“Add to this the prospect of an interest rate rise either later this year or early next and life could well get tougher – particularly for young people who have overstretched themselves and for whom a rate hike will be a totally new and unpleasant experience.”
On Tuesday, the Treasury launched an open consultation into problem debt, seeking views from creditors and debt advisors on how to implement a six-week ‘breathing space’ for debtors.
This period would give people time to seek financial advice on how to manage their debts and could also include legal protections that would shield individuals from further creditor action.