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Government figures for England and Wales show that over 30,000 people became insolvent during the first quarter of this year. According to the insolvency service this is up 23.9% on the same period in 2006. However, although this is another record high the rate of increase in personal insolvency has been slowing down.
The latest figures show that 16,842 people went bankrupt, while 13, 233 entered into an Individual Voluntary Arrangement (IVA). Bankruptcy is the traditional way to deal with overwhelming debt but, although it is over in one year, you will lose your assets. An IVA is an agreement with your creditors whereby you have to pay off some of your debts, either in one go, or in instalments over a number of years, but you are less likely to lose your home. According to research by KPMG it has become more difficult to make a successful application for an IVA. In the first 3 months of this year 18% of applications were refused by lenders. This was double the rate of rejection at the same time last year.
Experts have warned that any further rise in interest rates could cause more people to become insolvent. If the rate rises by half a percent, then monthly payments on a £150,000 repayment mortgage will increase by £60.00.
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