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Portland warns Bankruptcies and Repossessions set to rise
Published on: 10 October 2007
Carl Faulds, Managing Director of Portland Business Recovery, the South's largest business recovery firm, has warned that the current stance of banks and major credit card lenders towards individuals in massive debt is likely to lead to a further rise in bankruptcies and more homes being repossessed.
Consumers facing large amounts of debt are able to enter into Individual Voluntary Arrangements (IVA's) to try and avoid bankruptcy. This is an arrangement between the individual and their creditors based on fixed monthly contributions, over a five year term, whereby all existing debt is cleared at the end of the term. This usually means that creditors get a percentage in the pound rather than repayment in full, but at the end of the five years the slate is wiped clean of all debt and interest. Currently, the number of people entering into IVA's is 47.6% higher than at the same time last year.
The attitude of banks and other lenders is not likely to improve the situation. Faulds reports that the banks and credit card companies have recently started taking a much harder attitude towards IVA's and are now rejecting a far higher proportion. The consequences are that the individual continues to remain liable for their entire debts plus accruing interest, which they may have no prospect of ever repaying; bankruptcy and the loss of their home becomes the only way out.
Carl Faulds said 'It's a combination of irresponsible borrowing and rash lending that has become a real recipe for personal disaster for the individuals involved. This leads to spiralling debt, bankruptcy and homes at risk. I spoke to someone a few days ago who had borrowed over £100,000 on credit cards and loans and now has no assets or income. The banks are concerned that the public's general attitude to debt has changed so much that they need to put their foot down and not let people off the hook without being made bankrupt. As a result they are now rejecting IVA's that six months ago would have been accepted.'
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