Is It True Is Our Society Now Bankrupt

OK perhaps the above headline might be accused as being slightly on the sensationalist side of things but go with me slightly as I explain my reasoning and the logic behind such a potentially controversial headline. The core message put out recently by the UK Governments Insolvency Service was that a record number of people in the UK were made officially insolvent between July and September 2006. The Governments Insolvency Service claimed that 27,644 people were either made bankrupt or entered into an Individual Voluntary Arrangement (IVA) as a way to control or manage their debts in an ordered fashion. It was too early obviously to know how big a percentage of those who entered into an IVA had it failed by their manager or supervisor but it has been claimed previously that in some cases up to 50/60 percent of those entering an IVA fail to complete it in an orderly manner and therefore find themselves being made forcibly bankrupt at a later date. The other key statistic was that insolvencies were apparently 55% higher than during the comparable period this time last year and the smart money (to spoil the metaphor) is on the figure topping the 100,000 mark for the year. Add to that the latest trend in Lifelong Mortgages whereby the Lender gives the Borrower up to 57 years to repay the mortgage and will extend up to 5 times the borrowers annual income on a LTV basis then you can see where it would be very easy to over extend oneself.

It would appear that the proportion of those applying for and entering IVAs rose as compared to those deciding (or having decided for them) to go down the straight bankruptcy route. This latter fact has been heavily criticised (and understandably so) by the mainstream press as the process of an IVA or (Chapter 13 Bankruptcy, its equivalent in the US) is very heavily marketed as the ultimate solution to provide the maintenance of the maximum amount of dignity in an otherwise sordid scenario. This is not entirely the case and is most certainly not always true. Whilst the principle of an IVA is fine and extremely noble, sometimes it is just not practical and therefore should be counselled against at the earliest opportunity.

That is not to say that IVAs are a totally worthless idea in principle. In the right circumstances they are ideal and managed correctly work extremely well for those who enter into the process with their eyes firmly open. Sadly this is not always the case and most often the reality is the exact opposite.

Stephen Morgan is an independent. More details about the above article can also be found at He also writes for

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