Ignore mounting debt at your peril, warns judge

Stephen Gerlis echoed the much-held view that the rise in insolvencies and repossessions is due to the fact credit is too readily available and that the rising cost of living is not being reflected in real income growth.

The result of this combination can be seen “practically every day” in the county court, he said.

He commented that mortgage companies are profiting from rising monthly instalments and the security of being able to repossess somebody’s house, while those with unsecured credit risk a knock on the door from bailiffs ready to seize “the plasma TV, PlayStation and laptop”.

Despite the bleak picture, Mr Gerlis advised debtors not to ignore the problem. He said visiting the lender or Citizens Advice is a helpful tactic because it demonstrates that action is being taken. Individual voluntary arrangements (IVAs) and bankruptcy are also becoming an attractive option for debtors.

“The reduction of the period of bankruptcy from three years to one is no doubt a factor in this, as is the possibility of wiping out most of the debts,” he added.

According to official figures, there were 12,228 IVAs and15,416 bankruptcies in England and Wales during the third quarter of 2006. Many experts expect individual insolvencies to rise over the first quarter of 2007 as a consequence of large expenditures at Christmas.

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