A record number of consumers went insolvent in the first three months of 2007, an indication that the economy has started on the downward trend.  Statistics from the Government’s Insolvency Service claims that 30,075 people declared bankruptcy or applied for an Individual Voluntary Arrangement (IVA) - the first time a quarterly total broke the 30,000 mark.

The figures are broken down with 16,842 consumers using bankruptcy, while 13,233 chose an IVA.
The number of insolvencies rose 23.9% over the first quarter in 2006.  IVAs are up 47.6% year-on-year.

Steve Treharne, head of personal insolvency at KPMG, warns that the high level of insolvencies may continue through 2007.

He said: “The fact that these figures have gone up doesn’t surprise me. There are a lot of people out there with financial difficulties that need sorting out.

“I expect to see the figures remain high, certainly throughout this year and probably into next.

“There are still a lot of people who haven’t faced up to reality yet and if we get an interest rate rise it will be another pressure on people who are really struggling.”

Too many consumers waited too long to ask for help. Many of them opted for the wrong debt management tool.  Other statistics show that consumers chose to use their high interest credit cards to pay mortgage payments and utility bills, instead of using a low interest secured loan.

Many of these people found out, too late, that the court can force the sale of a home to pay delinquent loans, including credit card debts and defaulted unsecured loans.