Figures recently released show that personal insolvencies rose at the greatest rate ever recorded in the last financial quarter.
We are now seeing an increasing number of sole-trader bankruptcies, after dealing primarily in the last few years, with consumer debtors. The impact of the banking crisis is not only putting pressure on the usual ‘victims’ – those connected with the building trade, pub landlords, independent retailers, etc – but is causing many professionals financial hardship. Those who have been encouraged to speculate on the property market during the good years have seen their investments slip into negative equity. The collapse of the property market has caused the demise of many estate agents, surveyors and even accountants and lawyers.
Credit Today, a publication which always carries numerous interesting articles recently headlined on particular piece ‘Rich List hit by insolvencies’. The article explained that the number of highly educated, wealthy individuals becoming insolvent rocketed by 43% during last year. One of the large Credit Reference Agencies is quoted as saying that the number of ‘bust privileged’ City workers, living in the exclusive postcodes of London such as Kensington, Chelsea, Regent’s Park and Hampstead has now risen to 202.
In an earlier Bulletin we expressed concern about the number of young people seeking advice on huge levels of personal debt. Increasingly over the last couple of years, we have seen a substantial increase in older debtors. The article in Credit Today bore out our opinion, stating that the older generation of people living on limited incomes in council estates of Northern and Midland industrial towns faced the highest number of insolvencies. Those living in the so-called ‘legacy of labour’ consumer bracket witnessed a 10% rise in the most recent quarter.
Torquay was highlighted (if that is the correct term!) as having the largest number of personal insolvencies – 10 in every 1000 adult residents became insolvent during 2009. Llandudno and Skegness – two other famous seaside towns – also saw high concentrations of insolvency, with around 8 in every 1000 residents becoming insolvent.
We have also seen an increase in the number of people who have borrowed against their home when property prices were increasing, only to now find they have mortgages in excess of the value of the property and which are unaffordable. Many of these people have absolutely nothing to show for the borrowing they are carrying and are, quite simply, ‘lifestyle’ bankrupts.
Let us hope that the credit crunch engenders a more responsible attitude, not just to borrowing, but also to lending. Many of the people who are going into bankruptcy now have, in the past, found credit just so easy to obtain, they have never considered that there may come a time (now!) when, for many, repayment of the borrowing is beyond their capability.