[exiges]

http://www.bbc.co.uk...siness-16868567

Fewer people were declared insolvent in 2011 in England and Wales than during the previous year, but the number of companies going bust increased.

There were 119,850 people declared insolvent over the year, the Insolvency Service said, which was down 11.3% on the record high of 2010.

In the final three months of the year, there was a 5.6% fall compared with the same period a year earlier.

The number of firms going bust in 2011 increased by 1.3% compared with 2010.

Debt choices
Personal insolvencies are still running at significantly higher levels than before the credit crunch. One in 366 people became insolvent in 2011, compared with a 25-year average of one in every 1,600.

Yet, the figures show a clear shift in the way people chose to deal with their financial troubles over the year.

There was a 29% fall in the number of people who were declared bankrupt, considered to be the most traditional form of insolvency, but one that puts assets such as a home at risk.

The total number of bankruptcies stood at 41,845 in 2011. This sharp drop meant the annual total was overtaken for the first time by Individual Voluntary Arrangements (IVAs).

Under this arrangement, an official deal is done between the individual and creditors on how to pay back debts. There were 49,056 IVAs in 2011, a fall of 3.2% on the previous year.

There was also a notable rise of 15% in Debt Relief Orders (DROs) in 2011 compared with 2010. There were 28,949 DROs - a relatively new style of insolvency for lower levels of debt.

However, Nick O'Reilly, an insolvency practitioner at chartered accountants HW Fisher, warned that these people could still face escalating problems.

"To qualify for a DRO, a person must have relatively small debts of less than £15,000. But there is every chance that those struggling with DROs now could slip into insolvency proper," he said.

[okaycuckoo]

I'm pretty sure the DROs are taking up the slack.

[Toto deVeer]

That's a lot of bad debt: Say 120,000 x GBP 20,000. You could say around 2 to 3 billion or so each year. Wonder who the counterparties are, and whether these debts are being marked to market.

[Debbie568]

I suspect the reason bankruptcy declarations are down is because it, ironically, costs a few hundred pounds to go bankrupt. Maybe there are increasing numbers of people who are technically insolvent but just stop paying their creditors and let whatever happens happen, simply because they can't afford to go bankrupt. Or they enter into other kinds of debt arrangements, like DROs.

[winkie]

Debbie568, on 02 April 2012 - 07:07 AM, said:

I suspect the reason bankruptcy declarations are down is because it, ironically, costs a few hundred pounds to go bankrupt. Maybe there are increasing numbers of people who are technically insolvent but just stop paying their creditors and let whatever happens happen, simply because they can't afford to go bankrupt. Or they enter into other kinds of debt arrangements, like DROs.

Yes, they are I would have thought be entering into other way of clearing smaller debt like the new DRO or IVA, which will have less impact on access to money in the future.....or tighter more responsible lending is feeding through having a positive impact on defaults, that has got to be a good thing for all concerned surely.....but I am sure there will be people out there who make their living from people that can't pay their debts, the same as there are people out there that have lost their livelihoods because of people that did not pay them what they owed.

[frederick]

And that is at record low interest rates, what would the number be if rates were 5%

[winkie]

frederick, on 02 April 2012 - 07:43 AM, said:

And that is at record low interest rates, what would the number be if rates were 5%

To be truthful whilst interest rates do make a difference, it is more the size of the debt than the rate of interest.

[interestrateripoff]

winkie, on 02 April 2012 - 07:46 AM, said:

To be truthful whilst interest rates do make a difference, it is more the size of the debt than the rate of interest.

I thought more the ability to service the debt is more important than either the interest rate or size of the debt.

[Debbie568]

winkie, on 02 April 2012 - 07:19 AM, said:

Yes, they are I would have thought be entering into other way of clearing smaller debt like the new DRO or IVA, which will have less impact on access to money in the future.....or tighter more responsible lending is feeding through having a positive impact on defaults, that has got to be a good thing for all concerned surely.....but I am sure there will be people out there who make their living from people that can't pay their debts, the same as there are people out there that have lost their livelihoods because of people that did not pay them what they owed.

There seems to be something morally wrong with our laws when a person who goes into a shop and takes something off the shelf and leaves without paying is a shoplifter, with a criminal record probably if caught, but a person who borrows from a bank and goes and buys something with their shareholders (yes, fiat, i know, not quite the real thing, but in principle) money - and continues to do this until they move from the "can afford it but won't pay" to "can't pay" category -get the "Oh poor you!" treatment. As in "Oh we know you fully intended to eventually pay for the item when you bought it, so don't worry old girl/chap. It SO isn't your fault that your circumstances have changed, and you can no longer afford the £40k or so you have overspent these last couple of years." Meanwhile, the bank is out of pocket on the interest, but just recharge the shop for the unpaid goods.

I've noticed a few shops around about the place with signs up saying "cash only". I hope they go to the bank often during the day, because it's like putting a big sign at the door saying "Rob me."

[winkie]

interestrateripoff, on 02 April 2012 - 07:58 AM, said:

I thought more the ability to service the debt is more important than either the interest rate or size of the debt.

There is always an ability until there is no ability....better to err on the side of caution.


Edit: I say that but in a not so ideal world we need the debt money to keep the economy flowing, no debt no expenditure so TPTB know the ropes and make allowances for it....after all, all expenditure credit or debit creates growth (gdp), the magic word of so called progress.....so some of it is going astray is to be expected, and there is definitely no possibility of getting blood out of a stone.

This post has been edited by winkie: 02 April 2012 - 01:22 PM

[fluffy666]

Debbie568, on 02 April 2012 - 12:01 PM, said:

There seems to be something morally wrong with our laws when a person who goes into a shop and takes something off the shelf and leaves without paying is a shoplifter, with a criminal record probably if caught, but a person who borrows from a bank and goes and buys something with their shareholders (yes, fiat, i know, not quite the real thing, but in principle) money - and continues to do this until they move from the "can afford it but won't pay" to "can't pay" category -get the "Oh poor you!" treatment. As in "Oh we know you fully intended to eventually pay for the item when you bought it, so don't worry old girl/chap. It SO isn't your fault that your circumstances have changed, and you can no longer afford the £40k or so you have overspent these last couple of years." Meanwhile, the bank is out of pocket on the interest, but just recharge the shop for the unpaid goods.

So.. imagine that a person has no assets, and £100k of debt which is going up at £15k a year in interest.

And their earnings after tax are £14k per year.

Should they spend the rest of their life handing over every penny they earn to the creditor? Presumably not being allowed more than the most basic food and accommodation, no travel, etc.?

[neil324]

fluffy666, on 02 April 2012 - 01:55 PM, said:

So.. imagine that a person has no assets, and £100k of debt which is going up at £15k a year in interest.

And their earnings after tax are £14k per year.

Should they spend the rest of their life handing over every penny they earn to the creditor? Presumably not being allowed more than the most basic food and accommodation, no travel, etc.?

Yes, might stop it happening, kabish?

[Bloo Loo]

Debbie568, on 02 April 2012 - 12:01 PM, said:

There seems to be something morally wrong with our laws when a person who goes into a shop and takes something off the shelf and leaves without paying is a shoplifter, with a criminal record probably if caught, but a person who borrows from a bank and goes and buys something with their shareholders (yes, fiat, i know, not quite the real thing, but in principle) money - and continues to do this until they move from the "can afford it but won't pay" to "can't pay" category -get the "Oh poor you!" treatment. snip

Its called moral Hazard...see it in 3D big screen in the City of London....DAILY.

[Bloo Loo]

neil324, on 02 April 2012 - 02:07 PM, said:

Yes, might stop it happening, kabish?

you cant have lending without default.