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Insolvencies set for record total Insolvencies set for record total
(about 4 hours later)
Official figures are expected to show a record number of people in England and Wales going insolvent.Official figures are expected to show a record number of people in England and Wales going insolvent.
PricewaterhouseCoopers (PWC) forecast that about 27,000 people will have gone insolvent between July and September.PricewaterhouseCoopers (PWC) forecast that about 27,000 people will have gone insolvent between July and September.
The figure includes bankruptcies and those entering Individual Voluntary Arrangements (IVAs) to manage debts.The figure includes bankruptcies and those entering Individual Voluntary Arrangements (IVAs) to manage debts.
If the prediction turns out to be accurate, it will represent a slight rise on the previous quarter, but a 50-60% increase year-on-year.If the prediction turns out to be accurate, it will represent a slight rise on the previous quarter, but a 50-60% increase year-on-year.
Experts have blamed greater personal debt for the rise in insolvencies.Experts have blamed greater personal debt for the rise in insolvencies.
Marketing IVAsMarketing IVAs
PWC said it expected that bankruptcies would be flat, but that there would be a sharp increase in IVAs.PWC said it expected that bankruptcies would be flat, but that there would be a sharp increase in IVAs.
No one sells bankruptcies, but there are lots of firms selling the IVA concept Pat Boyden, PWC No one sells bankruptcies, but there are lots of firms selling the IVA concept Pat Boyden, PWC href="/1/hi/business/6109330.stm" class="">Q&A: Rising Insolvencies
IVAs are heavily marketed by providers, who make money from acting as go-betweens for lenders and borrowers.IVAs are heavily marketed by providers, who make money from acting as go-betweens for lenders and borrowers.
Some debt charities and lenders have criticised IVA providers for marketing them to people who would be better off either going bankrupt or coming to an informal arrangement with creditors.Some debt charities and lenders have criticised IVA providers for marketing them to people who would be better off either going bankrupt or coming to an informal arrangement with creditors.
"The lenders seem to feel that the growth in IVAs is due to the marketing. No-one sells bankruptcies but there are lots of firms selling the IVA concept," PWC partner Pat Boyden told BBC News."The lenders seem to feel that the growth in IVAs is due to the marketing. No-one sells bankruptcies but there are lots of firms selling the IVA concept," PWC partner Pat Boyden told BBC News.
Mr Boyden added that the problem of indebtedness seemed to be easing of late.Mr Boyden added that the problem of indebtedness seemed to be easing of late.
"Between 2000 and 2005 we saw a doubling of debt and a similar increase in insolvency."Between 2000 and 2005 we saw a doubling of debt and a similar increase in insolvency.
"However, in recent times, people have been a bit more cautious and there has been a flattening-out of debt and bankruptcy."However, in recent times, people have been a bit more cautious and there has been a flattening-out of debt and bankruptcy.
"This seems to be reflected in the number of bankruptcies, which are flat, but not in IVAs, which have risen... Marketing seems to be important in this," Mr Boyden added."This seems to be reflected in the number of bankruptcies, which are flat, but not in IVAs, which have risen... Marketing seems to be important in this," Mr Boyden added.
In response, a leading IVA provider, Thomas Charles, told BBC News that they were reacting to a real consumer need and not pushing the IVA concept inappropriately.In response, a leading IVA provider, Thomas Charles, told BBC News that they were reacting to a real consumer need and not pushing the IVA concept inappropriately.
"If somebody in debt talks to a debt advisory firm, they should be given a full understanding of all the options - including bankruptcy, IVAs and informal arrangement plans," said James Falla, managing director of Thomas Charles."If somebody in debt talks to a debt advisory firm, they should be given a full understanding of all the options - including bankruptcy, IVAs and informal arrangement plans," said James Falla, managing director of Thomas Charles.
"The key is, advice has to be measured, correct and well-targeted. Nobody can enter an IVA without the acceptance of the creditors and that ultimately is the backstop," he added."The key is, advice has to be measured, correct and well-targeted. Nobody can enter an IVA without the acceptance of the creditors and that ultimately is the backstop," he added.
Rate riseRate rise
Problems for debtors may just be about to get worse.Problems for debtors may just be about to get worse.
Next week, the Bank of England will decide whether UK interest rates should rise, thereby pushing mortgage repayments higher.Next week, the Bank of England will decide whether UK interest rates should rise, thereby pushing mortgage repayments higher.
Most analysts predict that an interest rate rise from 4.75% to 5% is on the cards.Most analysts predict that an interest rate rise from 4.75% to 5% is on the cards.
"It is difficult to predict what the impact of a rate rise will be on insolvencies, but household budgets will be squeezed and it may increase difficulties for some," Mr Boyden added."It is difficult to predict what the impact of a rate rise will be on insolvencies, but household budgets will be squeezed and it may increase difficulties for some," Mr Boyden added.