Figures unveil big rise in personal insolvency

Figures released by R3, the insolvency trade body, show that the total number of new personal insolvency cases in Yorkshire rose from 3,033 in 2000 to 13,312 last year.

In 2000, the rate of personal insolvencies in Yorkshire per 10,000 people was 8.0. Last year, the figure was 32.1 per 10,000 people.

However, the figures show significant variations around the county.

In Doncaster, there were 139 new personal insolvencies in 2000; this figure had risen to 1,001 in 2009. Over this period, the rate of personal insolvencies in Doncaster increased from 6.4 per 10,000 adults to 44.1.

By contrast, in Craven, North Yorkshire, the annual rate of personal insolvencies rose from 31 people in 2000 to 103 last year. In Craven, the rate of insolvencies per 10,000 people was 7.4 in 2000. Last year, the figure was 23.1.

Peter Sargent, the former R3 president who is a partner at the Halifax office of Begbies Traynor, said: "The poorer parts of Yorkshire have suffered more than the more affluent areas. The story of the recession is not about corporate insolvency – it's personal insolvency.

"People have been encouraged to borrow more over the years and the chickens have come home to roost. Doorstep lending is more prevalent in poorer areas.

"A lot of it is down to financial education and people not realising that they have to pay the money back with interest.

"The carrot was dangled in front of so many people. It was easy to borrow money. Now you find people are up to their necks in debts."

Mr Sargent said the number of people involved in formal insolvency proceedings was "just the tip of the iceberg" because the figures did not include consumers who were in debt management plans.

In the UK, the number of people estimated to be in debt management plans varies from 300,000 to 700,000, Mr Sargent added.

Mr Sargent said the good news was that the vast majority of Yorkshire people had been able to manage their finances, despite the strains caused by the recession.

He added: "In corporate and personal insolvencies, the banks are keeping the businesses and individuals financially afloat.

"One of the good things is that the banks are showing forbearance with businesses and individuals in difficult financial circumstances.

"It's better to keep a roof over somebody's head than for their house to be repossessed."

However, Mr Sargent didn't believe that there would be a dramatic drop in the rate of personal insolvencies over the next few years.

He said: "I believe personal insolvencies will plateau at this sort of level. I don't see it going down much next year.

"The real problem will come when interest rates go up, which they will sooner or later. The other problem is increases in VAT, which come in next year.

"This will affect consumer spending and will mean fewer people go to restaurants, and go out generally. The economy is like a giant engine, you need to tweak it a bit to keep it balanced properly.

"Everything has got to be done very delicately. One of the big problems is that the media expect things to be done instantly.

"People's salaries are not going to go up very much in the next few years, they are going to have to live within their means and repay their debts.

If people have got problems, they shouldn't be afraid to talk to their creditors."

'STILL AFEAR OF ADMITTING PROBLEMS'.

Peter Sargent is one of the best known insolvency professionals in the UK.

He is a former president of R3, the Association of Business Recovery Professionals, and works as a partner with Begbies Traynor in Halifax, where he specialises in small family managed businesses and bankruptcies.

He said: "While we have seen examples of irresponsible lending by creditors, people also need to rein in their own borrowing.

"When problems occur I have known people to 'case my joint' for days before coming in as there is still a huge fear of admitting financial problems. Seeking advice will prevent greater problems further down the line."

He started his insolvency career at Revell Ward, a mixed firm in Huddersfield. He became a partner in the practice in 1988 and subsequently left to start his own firm in 1995.

The firm was then acquired by Begbies Traynor in November 2005.

He was also a founder member of the Huddersfield Town Survival Trust which bought about the rescue of the club by local businessmen in 2004.