Worst company failure rate for 16 years, 57% higher than a year ago, plus gloom as personal bankruptcies soar

Company failures reached a 16-year high in the first three months of 2009, official figures showed yesterday.

There were 5,011 company liquidations in England and Wales between January and March – the highest since the second quarter of 1993 on a non-seasonally adjusted basis.

The gloomy figures were 57% higher than a year ago and a 13% jump on the last three months of 2008.

It is the fifth successive quarter of rising corporate insolvency.

Further, a record 19,062 people were declared bankrupt on a seasonally adjusted basis during the first three months of the year, 23.4% more than in the same period of 2008, the Insolvency Service said.

The number of people who went insolvent, which includes both bankruptcies and those taking out an Individual Voluntary Arrangement (IVA), rose to a new high of 29,774.

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Number of people declaring themselves bankrupt rises

THE number of people declaring themselves bankrupt is continuing to rise, new figures show.

The statistics, released by the Ministry of Justice yesterday, show a 38% increase in people in Wales petitioning for their own bankruptcy, as opposed to being forced into bankruptcy by a creditor, to 893 cases in the first quarter of 2009.

Some of the biggest increases in cases in Wales were seen in:

Bridgend, where the number of cases rose by 117% to 63;

Blackwood, where cases rose by 84% to 46;

Newport, an increase of 34% to 94 cases; and

Pontypridd, an increase of 23% to 53 cases.

In the three months ended March 31 there was an increase of 33% in the number of people making themselves bankrupt in England and Wales compared to the same quarter of last year.

At the same time there was also an increase in the use of individual voluntary arrangements (IVAs) which rose 11% compared to last year.

The figures reveal that 17,606 people successfully petitioned to bankrupt themselves and 9,807 agreed an IVA in the quarter January to March 2009.

John Bangham, director of personal insolvency for KPMG’s Cardiff office, said: “This means that a total of 27,413 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 91% of all personal insolvencies.

“Bankruptcies where the debtor makes a positive decision to go bankrupt have increased by 33% since the same period last year to 17,606. At the same time, the number of IVAs, where the debtor seeks to come to a deal with the creditors, has risen by 11% to 9,807, although they fell by 6% when compared to the last quarter of 2008.

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IVA For People With Bankruptcy - Help to Perk Up Your Financial Status

Introduction:

Are you under financial troubles with unaffordable debts and a really hard situation come up in front of you? Is bankruptcy acted as a big spot in your financial standing and you are finding difficult to live with that spot? This scheme is basically stands individual voluntary agreement which avoids the trauma of bankruptcy. It is a confidential advice which will be provided to the borrower by the lender to settle down their debt traps without any rigid or tedious formalities.

Advantages:

Looking for suitable debt solution? You are at the right place as IVA for people with bankruptcy will help you to provide apt advice. IVA bankruptcy is a legal agreement between the borrower and the lenders which give you suitable advice and give you variety of schemes to opt for so that you will be able to pay off your debt as per your affordability and easiness. It is an easy help which provide a sign of relief to the applicant and revive his expenses. You can revitalize your financial situation with the help of this scheme.

To get applied with this service, you can avail it with online mode with the comfort of your home or office having a desktop integrated with internet. You don't need to face any hassle of standing in the long queues outside the lender's place. However, IVA is the best solution to prevent your property from liquidation. No hassle being faced with having spots in your credit reports. No collateral is being demanded to place as it is an agreement which comprised of a particular scheme or plan to pay off your debts with reasonable installments moving away from the debt tapping situation with ease.

Who can qualify?

Are you a UK resident?
Are you having a legal age of eighteen years or more?
Have a valid and active checking account?
A regular employed earning steady income in your hand?

Hurray! As you are aptly eligible to avail this prominent service without any restrictions and obligations at all!

For more about this author please visit: http://EzineArticles.com/?expert=Jennifer_Morva

Homeowners Now Taking Out Over Half Of All IVAs

Commenting in response to Q1 2009 figures announced by the Insolvency Service, Stuart Bungay, Director of Financial Services, TDX Group said: "According to our data the numbers of homeowners resorting to IVA continues to rise, representing around 51% of all IVAs compared to 34% at the beginning of 2008.

“This is largely due to a combination of house price depression and fewer options for refinancing, leaving more homeowners with no choice but to enter formal insolvency arrangements. These people, should they fail to maintain their IVA, could end up increasing repossession figures.

“TDX Group analysis indicates that of all IVAs activated around 40% are never completed and that 15% stop paying in the first year.

"We also believe a growing number of people are finding themselves without any means to pay their debts, and are consequently unable to meet the criteria required by either an IVA or a Debt Management Plan.

"Unfortunately there is very little data on this population and as a result, we may all be underestimating the amount of people who will take out a Debt Relief Order. Introduced last month, DROs are designed to provide a cheap, accessible insolvency option for individuals with relatively low levels of debt but little or no prospect of repaying.

“Estimates for take up of DROs in the first year currently range from 14,000 to 150,000. If the top estimate is correct, this could equate to around £1.8 billion of debt. It’s going to be critical that creditors maintain good data about DROs over the next year if the industry is to get any understanding of the true extent of debtor distress.”

Source: http://www.creditman.biz/uk/members/news-view.asp?newsviewID=9939&id=1&mylocation=News&chksrc=NNow4251

Middle England is caught in debt trap as house prices fall and job hopes dim

Increasing numbers of middle-class families are being caught in the debt trap as house prices continue to fall and job prospects diminish, a new report suggests.

Plunging property prices have cut off access to additional funds for many homeowners who relied on remortgaging their property to pay off credit-card debts and personal loans, forcing many into financial difficulties as they struggle to meet their repayments.

The proportion of homeowners being forced to declare insolvency has doubled since 2007 and is set to rise further, figures from Grant Thornton, the accounting firm, show. Homeowners accounted for nearly 70 per cent of applications for individual voluntary arrangements (IVAs) received by Grant Thornton in 2008's second half, up from 58 per cent in its first half and about 35 per cent in 2007's first half.

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Debt management or IVA?

If you’re in debt, you may have heard of debt management plans and of IVAs (Individual Voluntary Arrangements). You may wonder how they differ and you may wonder – most importantly – which one could be right for you.

Let’s start with four important points:

First: they’re both arrangements that could help you if you can’t keep up with your monthly payments to your unsecured debts.

Second: they can both involve asking professionals to help you pay off your unsecured debts at a rate you can afford (professional help is a fundamental part of an IVA, but anyone thinking of debt management can either talk to their lenders themselves or ask a debt management organisation to do it on their behalf).

Third: one (debt management) is an informal plan, while the other (IVA) is a legally binding agreement between you and your lenders.

Fourth: they aren’t the only debt solutions – you’ll need to talk to a debt adviser who understands the various debt solutions available and can provide advice on which one is most appropriate for someone in your situation.

Debt management plans

For anyone who goes to a debt management organisation, a debt management plan starts when you ask them to help you clear your debts. When you tell them what you owe, what you earn and what you need to live on, they can help you figure out how much you can realistically afford to pay towards your unsecured debts every month – after taking your essential living expenses into account.

Once you’ve agreed on that figure, they’ll contact your unsecured lenders and ask if they’ll consider making a few changes to your repayment terms. They may agree to freeze interest, for instance, or waive charges. Perhaps most important, they may agree to accept lower payments.

If your lenders agree to the plan, you’ll start making the agreed monthly payments. The debt management organisation will usually handle all correspondence between you and your lenders, and re-negotiate if any change in your circumstances leads to an increase or decrease in the amount you can pay to your lenders – if your income drops, for example, or your mortgage payments drop.

IVAs

As a form of insolvency, an IVA can actually write off some of your debt. It’s a legally binding agreement designed to help people who are unable to repay their debts within a reasonable time period.

Like debt management, an IVA involves making regular monthly payments, based on the maximum you can afford once all your essential expenses have been taken into account.

However, it will have a much bigger impact on your credit rating than a debt management plan. This may make it more difficult and / or expensive to be approved for credit for a year after it’s finished. For the duration of the IVA (normally, five years) the amount of credit you’ll be allowed to apply for will be severely limited.

To enter into an IVA, you’ll need to talk to an Insolvency Practitioner (IP). Together, you’ll draw up an IVA Proposal – a document that tells your lenders how much they can expect to receive if they approve the IVA. If the Proposal is approved by lenders who collectively ‘own’ 75% of your debt, the IVA can go ahead.

If it’s approved, you’ll spend (in most cases) 60 months making your monthly contributions and – if you’re a homeowner – you may be required to release some of the equity in your home in the 54^th month. If all goes well, any outstanding debt will be written off at the end of the IVA.

Debt consolidation or IVA, which is the best?

Why do people consolidate their debts or enter into IVAs (Individual Voluntary Arrangements)? People in debt may be looking for a debt solution that can reduce their monthly debt repayments and help them get out of debt at a rate they can afford.

Debt consolidation loans and IVAs can both do this, but they’re very different debt solutions, suitable for people in very different situations. Neither is better or worse than the other – it’s a question of which is more suitable for the individual in debt.

So, first of all, there’s the issue of eligibility. As a formal debt solution and a form of insolvency, IVAs are only available to people who genuinely can’t keep up with their repayments to their unsecured debts.

Debt consolidation loans are, in theory, available to anyone – everyone has the right to take out a new loan that’s large enough to pay off their other unsecured debts.

Second, there’s the total debt to consider. IVAs are normally only suitable for people who owe at least £15,000, although this figure isn’t set in stone.

There’s no minimum amount that makes someone eligible for a debt consolidation loan – if they think it’ll improve their financial situation, they’re free to consolidate their debts if they want to, as long as they can find a loan.

Third, there’s the impact on the individual’s credit rating. By simplifying their finances and reducing their monthly debt repayments, a debt consolidation can help them avoid late / non-payments, which should help them keep their credit rating from suffering.

An IVA, on the other hand, is a form of insolvency – it’s not regarded as being as serious as bankruptcy, but it will have a serious impact on someone’s credit rating, and probably make credit harder to obtain and more expensive. It’ll stay on their credit report for six years, although this won’t really be an issue for the first five of those years (the normal length of an IVA), as people aren’t normally allowed to borrow money while their IVA is in progress.

Fourth, there’s the potential impact on the borrower’s home (if they’re a homeowner). Many people choose to consolidate their debts with a secured loan, securing their new loan against their house. This should get them a better rate of interest than they’d get with an unsecured debt consolidation loan, but they’re potentially putting their home at risk – if they don’t keep up their monthly payments, the lender could repossess their home (although lenders do see this as a last resort and will try to find another solution to the problem).

IVAs can protect a borrower’s home. Unlike bankruptcy, an IVA is very unlikely to require the homeowner to sell their home, although they are likely to have to free up some of the equity in their home towards the end of the IVA, so they can pay off more of their debt.

Fifth, there’s the question of writing off debt. With an IVA, the individual basically agrees to pay off as much of the debt as they realistically can over the next five years. They commit to making regular, fixed payments – the maximum they can afford once they’ve taken their essential monthly expenses into account. In return, the creditors agree to write off any outstanding debt at the end of that period – as long as the borrower has kept up with their payments.

With a debt consolidation loan, there’s no question of writing off any debt. The individual is simply borrowing enough from a new lender to pay off their ‘old’ lenders, so there’s no reason anyone should agree to write off anything!

If you’re wondering whether a debt consolidation loan or IVA could be the debt solution for you, contact a professional debt adviser.