Debt expert says govt insolvency figures understated

Wed, 10 May 2006

Personal debt among Britons has led to a sharp increase in insolvencies in the first three months of the year, government figures show.

But one expert on adverse credit problems and individual voluntary arrangements (IVAs) believes this data does not describe the full extent of the problem of over-indebtedness.

Andrew Smith, the marketing director at IVA provider ClearDebt, says he thinks the latest figures by the government's insolvency service are "understated".

According to the government, some two-thirds of people with adverse credit problems have declared themselves bankrupt, while others opted for IVAs.

However, Mr Smith says the big banks have been struggling since the end of January with a sharp increase in IVA proposals.

In order to cope with this rise, ClearDebt has had to extend the period that banks have to respond to such proposals from 14 to 21 days, Mr Smith explains.

He adds: "So there must be hundreds or maybe thousands of IVAs applications that haven't been recorded in these statistics."

The level of personal debt among Britons is a growing concern, with data from the Economic and Social Research Council calculating that personal debt increases by £1 million every four minutes.

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