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To: maceng2 who wrote (567)	2/7/2004 3:01:01 AM
From: maceng2	Read Replies (1) \| Respond to of 1417

Credit binge is blamed for bankruptcy rise Rupert Jones Saturday February 7, 2004 The Guardian guardian.co.uk The number of people going bankrupt has risen by almost a third over the past year to its highest level since the last recession, exacerbating fears that ADVERTISEMENT Britain's borrowing binge could be about to tip over into a major debt crisis. Less than 24 hours after the Bank of England raised the cost of borrowing, official figures were published yesterday showing that more than 10,000 people saw their finances go into meltdown in the final three months of last year - the equivalent of 111 people a day. That is 29% up on the corresponding period in 2002 and the highest figure since the first quarter of 1993, when the economy was emerging from recession. The data prompted warnings that Thursday's rate rise, which many analysts see as the first of several, will dramatically increase the number of people struggling to keep up with their debts. At the same time, some experts said new legislation coming into force in April, aimed at reducing the stigma attached to bankruptcy, could create a fresh surge in personal insolvencies. During the period from October 1 to December 31, 10,271 individuals in England and Wales became insolvent, the Department of Trade and Industry announced. But at the same time the number of company failures fell to 3,316 - a 22.5% drop on the corresponding period in 2002. That starkly illustrates how the consumer spending boom has spelt dramatically differing fortunes for consumers and many businesses, said Mike Jervis, a partner at the business recovery services arm of PricewaterhouseCoopers. "Increased consumer spending is filtering through to businesses with a significant fall in company failures. However, the increase in consumer debt has led to record levels of personal insolvencies." The increase has been blamed in large part on people amassing excessive debts on credit and store cards. The figures come the day after the Bank of England's monetary policy committee raised interest rates bya quarter-point to 4%, which is likely to increase pressure on people who are already troubled by debt. The Bank was in effect telling consumers to rein in their borrowing, and analysts said the scale of further rises would depend on how they responded to the warning shot. In the fourth quarter of last year total lending to individuals stood at £29bn, and the Christmas and new year spending binge suggested that November's quarter-point base rate rise had little impact on consumer behaviour. A DTI spokesman said a number of factors affected bankruptcy levels, with availability of consumer credit an obvious one, with others including unemployment, ill-health and relationship breakdowns. The department recently announced a shake-up of credit laws which includes stricter rules on the way lenders can advertise. "The rise in the number of personal insolvencies has well and truly reached galloping levels," said Mike Gerrard, a personal insolvency expert at accountant Grant Thornton. He warned that in the short term "things are going to get worse before they get better". He said: "Over the next few months we are certain to witness sustained levels of individual insolvencies as higher mortgage repayments will contribute to plunge many more that are on the brink of insolvency into bankruptcy." Andrew Redmond, chief executive of advice group Debt Free Direct, said there was a danger the number of people going bankrupt could increase dramatically once provisions in the new Enterprise Act come into force in April, reducing the time before debtors are discharged from bankruptcy from three years to one