There has been a stark rise in the number of people declaring personal bankruptcy and entering into IVA agreements within the Northern parts of Britain.

According to accountancy group KPMG, certain areas within the North have seen instances of Bankruptcy more than treble during the first quarter of 2008. Both Newcastle and Sunderland have been identified as the major hotspots for this rise with the increases standing at 30% and 75% respectively.

A spokesperson for the group commented that a culmination of different economic factors such as a dramatic rise in the cost of food as well as household bills and of course mortgage repayments had begun to take its toll on thousands of people across the UK, however, as demonstrated within these findings Britain’s less financially prosperous areas are far less able to acclimatise under the increasing financial strains and thus a rise in insolvency within these lower earning areas is almost inevitable.

A separate survey has also revealed that some 35% of Britons are in the process of reviewing their personal budgets, with a view to assigning new buffer zones to their expenditure and to cover themselves against any further increases to the overall cost of living.

Thousands of credit card borrowers across the UK are having there spending limits restricted, or in the more severe cases their accounts closed completely. However very few providers have been forthcoming with their customers as to why these changes are taking place.

According to recent research, almost 3 million card borrowers have seen their accounts affected in some way over the past few months. Approximately 1/3rd of people have reported that their borrowing limit has been downsized, with the remaining 2/3rds having their account terminated with little to no explanation as to why.

The trend is believed to be having a huge bearing on certain borrowers, especially those people who rely on their credit card facility to manage the payment of bills and gaining from the grace period in which the funds have to be repaid. The sudden withdrawal of card services may have a serious effect on this particular group of consumer’s ability to balance their finances, thus increasing their exposure to debt.
 
It is most probable that restrictions on the overall volume of funds available to credit providers (as a result of the credit crunch) is the primary reason for the sudden change in borrowing facilities, however, providers owe it to their customers to be more open with regards to the specifics of a service retraction, before it is put into place.

An independent financial journalist has recently revealed that a large proportion of Britain’s youth are running the risk of becoming insolvent or requiring IVA assistance due to a wanton need to look good and fit in with their peers.

Accordingly, more than 25% of people aged between 18 and 26 have been found to frivolously spend their month end wages on the latest designer fashions, grooming products, gadgets and gizmos, whilst putting little to nothing aside in case of a financial emergency.

On average, individuals classed within this demographic are likely to fritter a staggering £4500 per year on these societal related needs, which is in turn believed to be pushing a good proportion of said individuals into a negative financial situation, thus running the risk of high end personal debt.

The claim is further supported through the results of separate survey conducted against the backdrop of the same demographic. It was found that approximately 60% of respondents admitted to having credit card and loan debts, which were amassed as a direct result of purchasing similar, non-essential items. In addition, 20% of the respondents claimed that they would much rather spend their cash on non-essential products and services, than allocate it to a savings account or investment bond.

Early estimates into a prospective rise of the number of Brits declaring insolvency during Q1 of this year have unfortunately come to fruition.

Recently released statistics show that the number of people entering into IVA agreements and declaring insolvency surpassed the 25000 mark, equating to a rise of more than 1.5% compared to the fourth quarter of 2007.

However, it has also been noted that although the country is currently in the midst of a major financial reshuffle as a result of the credit squeeze, and in spite of the increase coming at the most common time for insolvencies (post Christmas) the figure is actually 1/6th lower than it was during the first quarter of 2007.

It has also been revealed that of the total number of people declaring insolvency during Q1 of this year, more than 2/3rds have come by way of Bankruptcy, leaving the remaining 1/3rd of insolvents opting to enter into an IVA agreement.

One of the biggest surprises is that the majority of debtors have chosen the Bankruptcy route over an IVA. It is though that a spate of bad press surrounding the IVA procedure during 2007 is the primary reason for the decline in popularity during 2008.