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Scots In Record Numbers Will Face Insolvency In 2011

by Jim ONeil on January 8, 2011

in Payday Loans News

PKF, a business advisory and accountancy firm, reports that Scots will file for bankruptcy in record numbers during 2011. The firm predicted that final 2010 data will reveal that 22,000 Scots took out a Protected Trust Deed or went into bankruptcy. This equates to 425 Scots entering these dire financial situations weekly and the 2011 statistics will be even glummer.

During 2011, the Comprehensive Spending Review will impact personal bankruptcy. This will result in higher levels of public sector unemployment. Rising interest rates will also cause more mortgage-paying Scots to file for personal bankruptcy. Corporate recovery partner Bryan Jackson reported that the CSR’s full impact has not yet been felt.

Another issue affects those who are more affluent but also more in debt. Many people are only able to remain in their homes because the base rate is at 0.5 percent. Once the interest rate begins to increase, Mr. Jackson predicts a growth in insolvency within the middle class. People who have little or no equity in their homes and high mortgage rates are the most vulnerable to interest rate increases.

An emergence from the recession is no solace to these individuals, who stand to lose their homes. Interest rates are predicted to begin rising in 2011 but the housing market recovery is not anticipated to

start until 2012 or later. This blocks the previously popular escape route of using rising home equity to reduce debts.

Anyone fighting off insolvency may be pushed into it by increasing utility costs and VAT increase. According to Mr. Jackson, there has already been an increase in the amount of payday loans designed to provide temporary relief. RSM Tenon predicts that UK personal insolvencies will hit record highs during 2010 and 2011. Many people must overhaul their finances to keep from joining this group.

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