Personal insolvencies are likely to reach record levels in 2009, it has been predicted.
KPMG has forecast that over 150,000 people will either be entering into Individual Voluntary Arrangements (IVAs), being declared bankrupt or entering a soon to be introduced Debt Relief Order over the next 12 months.
Creditors had to write off over £1.1 billion in debts in 2008 as a result of people entering IVAs, with research by the Big Four firm showing the average IVA debtor owed £47,800 during the course of last year.
Director of personal insolvency at KPMG Mark Sands explained that interest, further charges and more borrowing increased people’s debts before they realised the extent of their problems.
“Most IVAs deal with personal loans, credit card balances and other forms of unsecured debts,” he explained, adding: “Too many people have borrowings that they have no realistic hope of repaying.”
Personal finance website Fool.co.uk recently warned consumers that many lenders will be cutting back on the amount of credit they make available in 2009, which may result in many borrowers facing mounting credit card debt.
By Tom Musk