KPMG: UK bankruptcies down 31% but debt bubble still a problem

Commenting on the figures Chris Nutting, director of Personal Insolvency at KPMG said: “Whilst the headline figures from the Insolvency Service show that bankruptcy numbers (12,539) are falling when compared to those previously seen in 2005, we must not forget that an additional 17,623 people went into a formal personal insolvency procedure such as an IVA or DRO in the first 3 months of 2011, a slight increase compared to the same quarter last year.”

“Despite the fall in bankruptcy numbers, KPMG’s research also highlights that the bubble of over-indebtedness continues to be a major problem with an increase in the number of households setting up informal arrangements with creditors, such as debt management plans, in an attempt to settle debts. According to our data, the typical bankrupt is in his mid 40s with unsecured debts of some £45,000.”

At the same time KPMG warns that forthcoming changes to the cost of entering some formal insolvency procedures could create a ‘stand off’ between creditors and debtors. Mr Nutting said: “My concern is that there will be a lot of people who will not be able to afford to declare themselves bankrupt, whilst creditors are unable to offer a practical solution that resolves the debtor’s financial problems.”