Dramatic fall in the proportion of bankruptcies instigated by lenders
- Lenders still failing to reign in the UK’s addiction to debt despite the credit crunch
- Only 14% of bankruptcy orders now issued by lenders
- More and more people turning to DIY bankruptcies
The proportion of personal bankruptcies instigated by lenders has fallen dramatically over the past seven years. According to research carried out by Wilkins Kennedy they accounted for just 14% of bankruptcy petitions over the last year to August, down from 28% in 2000.*
The research, carried out by Wilkins Kennedy, shows that lenders were still failing to address the UK’s growing debt problem even as the subprime lending crisis took hold.
Keith Stevens, Insolvency Partner at Wilkins Kennedy comments: “The figures prove that banks and credit card companies have been sending out the wrong message to individuals who believe they can continue living beyond their means.”
“The dramatic fall in the proportion of bankruptcy orders issued by lenders shows that they are still failing to clamp down on customers whose debts are spiralling out of control.”
Wilkins Kennedy says that the rise in the proportion of DIY bankruptcies comes as a result of lenders’ reluctance to push the button whilst borrowers were still accumulating penalty charges on their borrowings.
Keith Stevens says: “Collecting the monthly interest on accumulated interest and the penalty charges had proved to be a profitable business for lenders.”
“More and more people are turning to DIY bankruptcies because they can no longer stand the pressure of trying to meet their repayments plus the penalty charges every month.”
Over the past two years Barclaycard has written off almost £2.6 billion as a result of bad debts.
Keith Stevens comments: “Only now are lenders beginning to cut credit card limits as they find themselves writing off bigger and bigger losses elsewhere in their operations.”
“Unfortunately lenders may find that they have left it very late in the day to try to wean customers off their addiction to spending.”
“Recent legislative changes have meant that bankruptcy is now a softer option. If you are not a homeowner or a professional then bankruptcy is generally the best option for you. If you don’t have a great deal in the way of assets then the consequences of bankruptcy are now almost non-existent and the terms are only in place for a year.”
“At the same time, lenders have begun laying out increasingly stringent terms for Individual Voluntary Arrangements (IVAs) and are now looking to recover 40 pence in every pound, up from just 25 pence in the pound a few years ago.”
ENDS
* Research based on a random sample of over 1,500 bankrupts across England and Wales up to the end of August this year
Press enquiries:
Keith Stevens
Partner
Wilkins Kennedy
Tel: 01784 435 561
Jane Lougher or Nick Mattison
Mattison Public Relations
Tel: 020 7645 3636
