Leeds United have been invited to arbitration by the Football League as they bid to overturn their 15-point deduction.



United were handed the fine in August as punishment when it was claimed the League One outfit failed to correctly follow insolvency policy after slipping into administration.


However, play-off chasing Leeds have now been offered the opportunity to go to arbitration after club chairman Ken Bates revealed the League made a deadline day offer.


"The letter arrived from the League's solicitors in the morning suggesting that this should go to arbitration with a Court of Appeal judge," Bates told the Yorkshire Post.



Discuss


"To quote their words, 'impartiality and independence will be guaranteed and the competence of the tribunal will be par excellence'. Impartiality and independence is what we have been arguing for all along.


"What makes me laugh is that it has taken six months to get to this position, six months in which the League have refused to discuss the matter with us.


"Only now, with the writ having been issued, do they instruct their lawyers to come back to us.


"It is a long overdue development and the pleasing thing from our point of view is that a Court of Appeal judge will hear it. After a Law Lord, they are the highest in the land.



Self-interest


"The decision to deduct us 15 points was purely one born of self-interest on behalf of the other clubs."


Leeds though have yet to decide whether they will accept the offer of arbitration.


When asked about Leeds' strategy Bates said: "We will have to discuss what our next move is."


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Stephen Nelson, the chief executive of BAA, has quit amid growing concern that the beleaguered airports operator faces severe debt problems.

BAA, which owns Heathrow and Gatwick, will confirm his departure today, sources close to the company said.

Mr Nelson has been head of the BAA for less than two years, during which time the company has come under sustained pressure for poor service and long queues at its airports.

Mr Nelson has also squeezed every penny out of the seven airports that BAA owns to pay the enormous debt that Ferrovial, the Spanish infrastructure company, took on to buy the company.

He is expected to be replaced by Colin Matthews, the former chief executive of Severn Trent.

Mr Nelson is one of several senior BAA executives to have left since Ferrovial took over the company and he leaves the group as it is forced to consider drastic measures to reduce its £10 billion debt, including a cash injection from a new investor or a sovereign wealth fund.

The company, which owns Heathrow, Gatwick and Stansted airports, wants to reduce its interest payments by refinancing the debt.

Its preferred option is to securitise income from the airports and replace about £4.7 billion of bonds.

It is also selling assets, including the retailer World Duty Free.

The credit crunch has made debt deals hard to put together and BAA has delayed refinancing by six months.

If it failed to refinance, the interest rate would rise further and the debt could be moved to junk status, making it almost impossible for the company to raise more money.

Analysts have given warning that this could lead to BAA running out of cash, potentially forcing it to stop maintenance at airports and to halt building projects, such as the renovation of Heathrow’s Terminals 1 and 2 before the 2012 Olympic Games in London.

Ferrovial has said that it can continue with its existing financing arrangements until 2011, but analysts believe that it must complete a deal within a few months or the company could be crippled.

Robert Crimes, an analyst with JPMorgan, said: “They will be forced to refinance to maintain their debt ratings, but it is going to be tough to get it done by the middle of the year.”

Alternatives to the securitisation plan are thought to include taking on new bank debt or finding someone to swap debt for equity.

BAA is advised by Royal Bank of Scotland and Citigroup: the latter received a cash injection from the Abu Dhabi sovereign wealth fund last year.

Nicolas Villen, chief financial officer of Ferrovial, admitted that it was considering alternatives to refinancing. “The capital markets are very difficult. We are working on the refinancing. We think it is possible but we have to study alternatives,” he said.

Ferrovial hopes to complete a £400 million sale of World Duty Free next month, with Dufry, the Swiss retailer, the French conglomerate Lagardère and Altadis, the Spanish tobacco group, among the bidders.


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Graydon UK has announced the launch of its 'next generation' commercial credit report with all additional information to be included in its Level 3 report now incorporated as standard.

Customers receiving Level 3 Graydon commercial credit reports will now be able to see:

• Payment behaviour indicator - assessing how quickly they are likely to be paid
• Odds of financial stress over the next 12 months - indicating if the company is likely to fail or experience severe financial stress within the following year
• XSeption flags that identify unusual business behaviour - as unusual patterns on the company may indicate possible fraud

Martin Williams, Managing Director, Graydon UK comments: "Credit scores in this country do a sophisticated job at predicting whether a business will fail or not, but credit managers need much more than this. Perhaps the biggest problems facing UK companies today are getting their invoices paid on time and avoiding fraud – Graydon’s new and unique payment indicator along with XSeption help answer those vital questions."

• Payment behaviour indicator
The Payment Indicator uses all payment information available to Graydon including aged debt data, payment performances from financial statements, industry averages, CCJs, trade references and other adverse payment information. Each element is assessed for its currency and relevance to a company size and then combined to create an overall payment behaviour indicator. If the indicator lies in the 'Good' zone the subject is likely to pay invoices on or near to due date; in the 'Normal' zone the subject may need chasing from time to time; in the 'Poor' zone stricter payment terms and close supervision of the account is recommended.

• Odds of financial stress
Increasingly, suppliers like to know the likelihood of a potential or existing customer going into liquidation or being dissolved. Graydon's alphanumerical rating is an assessment of businesses creditworthiness for short-term credit decisions. To complement this we have added the likelihood of a company experiencing financial stress over the next twelve months for example Dissolution, Liquidation, Receivership, Petition for Winding-up, Resolution for Winding-up, Winding-up Order, Creditors’ Meeting or Administration.

• XSeption flags
Graydon's XSeption marker flags patterns of business activity that may, in some cases, be worth looking into. Typically, up to 3-4% of UK businesses exhibit signs of 'unusual' corporate activity. Some turn out to be quite innocent; others may spell danger to suppliers. XSeption hunts for the unusual behaviour that suppliers need to know before making any decision, such as companies who have filed absolutely identical accounts to another company or that they have had multiple address changes within the last 12 months. XSeption helps improve the quality of credit decisions by consolidating information, and more importantly - detail, some of which clients wouldn’t have known was relevant to their risk decision.


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Thousands of people with a history of personal insolvency face an interest rate double whammy in the next 12 months.

Under the terms of their individual voluntary arrangements, they have to realise some of the equity in their properties and put the money towards paying off their debts.
However, the new mortgages they must take out will probably be at higher rates than their existing loans because of the credit crunch. On top of this, borrowers face being reclassified as 'sub-prime' customers and be charged even more.

IVAs are an alternative to bankruptcy under which the lender agrees to a repayment scheme for some of the debt in return for the lender, usually a bank, writing off the rest. Though they have been available since the Eighties, IVAs took off in a big way only about five years ago.

Standard IVAs include a clause under which the borrower, should they be a homeowner, will release equity from their home to help reduce their debt. This release is usually in the final year of the IVA, meaning the first wave of such remortgaging will be taking place in the next 12 to 18 months.

One senior source in the insolvency advice business said: 'There is a problem here. People in an IVA will be remortgaging into something significantly more expensive. 'Not only are mortgage rates higher than when these people bought their houses, but they could well be classified as sub-prime - that is to say as riskier borrowers who need to be charged more to compensate for that risk.'

However, because all IVAs contain a clause stating that borrowing for this equity release must be 'affordable', some people in IVAs may say they cannot afford the second mortgage. If this can be proved, the lender must write off the money it had expected.

Andrew Smith, marketing director with leading debt advice company ClearDebt, said: 'Banks have agreed to take this on the chin.' The British Bankers' Association said there was no sign yet that member-institutions were concerned about a shortfall.


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RANGERS yesterday announced a profit of just over £3 million for the six months to December 2007, but have seen their debt rise to an undisclosed figure.

The Ibrox club's interim accounts do not detail their debt, but chairman Sir David Murray confirmed it has increased from the £16.5 million amount recorded in their most recent annual report last July as a result of investment in new players for this season.

Rangers' turnover for the six-month period increased by £10 million to £33 million as a consequence of their qualification for and participation in the group stage of the Champions League.

The interim accounts do not include the proceeds of Alan Hutton's transfer to Tottenham Hotspur last month in a deal which could ultimately earn Rangers £10 million, so the club will expect their year-on-year debt to have fallen when they publish their next set of annual figures. It stood at almost £74 million in 2004, before being dramatically reduced to less than £6 million by 2006 after a £53 million share rights issue that was underwritten by Murray. It rose again last year after Rangers failed to qualify for the 2006-07 Champions League.

Murray has promised Walter Smith the resources to strengthen the squad in the summer and paid a glowing tribute to the manager for reviving the club's fortunes after the ill-fated tenure of Paul Le Guen.

"It's a remarkable turnaround for the club in the last 12 months and all credit must go to the club management, Walter, the players and the supporters," Murray told rangers.co.uk. "I think that after the disappointing Paul Le Guen era, and it was obviously disappointing for him too, we have been able to regroup and rebuild the club in quite a short period of time.

"The catalyst was Walter. He has got the club back to basics. We went down a foreign route and it didn't work for anybody. That's not a criticism of Paul. We had a go and then we parted.

"We have Scottish identity in the team again and that was the route that Walter wanted to go down when we spoke about him coming back last January. We have spent £15.5million on players since Walter was appointed. The Alan Hutton money will not kick in until the next set of figures, so that makes our current situation all the more remarkable. There are still funds to invest. Walter had money to spend in January, but he said at the time that if he could not find someone who was an automatic pick then he was more than happy with the group.

"He was not prepared to spend money just for the sake of it. So there will be money available in the summer for him. I think it's quite obvious what we need to do. We want to go on and be successful with this group and then strengthen again. I think the judgment of Walter Smith in the last 12 months has been remarkable and we should back that judgment."

Murray believes Rangers can "remain profitable" if they qualify for the Champions League on a consistent basis and says the club have only dropped out of the Deloitte top 20 rich list of football clubs, in which Celtic were included last week, because of their deal with JJB Sports, which pays a guaranteed annual sum for the franchise of the club's retail wing.

"We are slightly disadvantaged in that chart because we don't have our retail turnover any more, having chosen to go down the JJB route," said Murray.

"We used to turn over £20million, but we now get a guaranteed net income and it is probably more than we would have had if we had kept the shops, because I notice that other clubs who are still running their own retail division are experiencing diminishing turnover."

Murray also confirmed plans to redevelop Ibrox and said he hopes to make an announcement in that regard "sooner rather than later". Rangers are understood to be looking at increasing the capacity of the stadium in conjunction with regeneration work being undertaken in the surrounding area.


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A publisher selling advertising space in safety awareness publications, has been wound-up in the public interest following an investigation by Companies Investigation Branch (CIB) of the Insolvency Service.

Glade Solutions Limited, a Manchester based company, began trading in June 2007 but were disrupted by CIB's enquiry when the company was forced to stop trading. CIB's investigation found, that despite having a national business operation soliciting sponsors and advertisers for two types of publication, neither publication had been produced and before CIB's intervention, sponsors had paid over £25,000.

Despite a lack of co-operation the investigation also found that the company traded in a manner contrary to the public interest, and was a continuation of other businesses previously closed down in the public interest.

CIB have, once again, warned businesses to remain wary of anyone cold calling asking potential customers to place adverts in wall planners, diaries, children's fund books and drug awareness books, magazines for emergency services personnel guides or other publications.

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Galahad Gold PlC said the resolutions regarding the voluntary liquidation of the company and the appointment of Tim Walsh and Richard Setchim of PricewaterhouseCoopers LLP as joint liquidators, proposed at an extraordinary general meeting, were duly passed today.

Accordingly, the company's admission to trade on AIM will be cancelled effective Feb 21, Galahad said.



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A SOUTH WALES business support company has ceased trading.

It was confirmed yesterday that Entrepreneur Action will now put itself into liquidation.

The company yesterday informed its creditors of the decision.

The Cardiff organisation had established strong ties with the former Welsh Development Agency and latterly the Welsh Assembly Government in delivering business support programmes across Wales.

In an e-mail statement from the company’s managing director Deborah Hackett, she said, “The directors of Entrepreneur Action and Entrepreneur Action High Growth Services have taken the decision to cease to trade and are taking steps to place both of the companies into liquidation.”

The company had delivered the Assembly Government’s high growth business support programme, which was funded by the European Union.

The programme provided fast-track support to new companies which have the potential to achieve a £1m-plus turnover within three years.

Companies were promised up to £40,000 of business support over a three-year period, provided by associates which included chartered accountants and lawyers.

Those on the programme paid Entrepreneur Action a £5,000 joining fee.

Although the programme was no longer being marketed, it is unclear how many companies still have support promised for the next few years.

A spokesman for the Welsh Assembly Government said last night, “In light of the decision taken today by the boards of Entrepreneur Action to place Entrepreneur Action and its associated company Entrepreneur Action High Growth Services into voluntary liquidation, the Welsh Assembly Government has, in accordance with the provisions of contracts it has in place with the companies, given notice to terminate the contracts with immediate effect.

“EA and EAHGS are independent limited companies which are not legally connected to the Welsh Assembly Government. EA and EAHGS have delivered services under contract with the Welsh Assembly Government.

“Our priority now is to explore options for identifying potential replacement service providers for both programmes.”



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By nationalising Northern Rock, Gordon Brown and Alistair Darling are indirectly setting themselves up in one of the most reviled and thankless of occupations - as debt collectors.

And debt collectors, possibly, on an industrial scale, for, if the economic slowdown proves lengthy, demanding money - with or without menaces - from struggling Rock borrowers is the only way that the sums can stack up for the Exchequer and prevent taxpayers being left to pick up a hefty tab.

Even in the sunny economic conditions of a year ago, the Rock was repossessing homes at the rate of eight a day and writing off loans at the rate of £2 million a week. Assuming that it is applying the same enforcement criteria today, the seizure rate and writeoffs will be escalating in leaps and bounds as mortgage bills rise and house prices fall.

The Government should brace itself for being portrayed, on the one hand, as heartlessly throwing defaulting borrowers and their families on to the street, while, on the other, allowing some welchers to get off free at the expense of innocent taxpayers. It will be lambasted either way. To that extent, Mr Brown was right to argue that handing over the Rock to either of the private bidders would have been the softer option.

Indirectly, ministers will have to get used to the difficult business of chasing bad debtors, threatening them with legal action, taking them to court, making them bankrupt or negotiating repayment terms under individual voluntary arrangements. Every time that they forgive a debt, they lengthen the odds on taxpayers being one day repaid in full.

Of course, the business of debt collection will be done by proxy. Messrs Brown and Darling were emphasising yesterday that the Rock would be run at arm's length and on commercial grounds. But this is a fig leaf. The only shareholder is the Tripartite Authority and the Treasury ultimately calls the shots there.

Ron Sandler, chairman-elect, has already made plain that the business plan has to be approved by the Authority. Deciding how hard to chase debts ultimately comes down to ministers. So does weighing up how much to risk by writing new business or not selling off existing assets. Mr Darling's claim yesterday that the bank would have “commercial autonomy” is far from the whole truth.

Mr Brown could not even maintain the illusion of an independently managed Northern Rock for the duration of his press conference. Asked about job losses at the Rock, he said that he would do his best to keep them to a minimum. Mr Sandler's hands are tied from the start. Ministers call the shots and will be blamed for the casualties. The union Unite knows this. Its statement calling for no compulsory redundancies ended with the not-so-subtle postscript: “Unite is the largest single donor to the Labour Party.”

The problem is not so much the the mortgage book, though even here there may be bigger problems than envisaged so far. Every time that Mr Darling mentions this £87billion or so asset pile, he is careful to emphasise that, in the opinion of the Financial Services Authority, this is blue chip. If house prices continue to fall, that may be optimistic. The Rock was the most aggressive mortgage lender on the high street at the very period that house prices peaked last year. If any major lender is going to be hit by negative equity problems, it is the Rock.

The bigger problem is the Rock's collossal book of unsecured debt, which stood at £8billion in the last published figures. This is outstanding amounts of credit cards, personal loans, overdrafts and other borrowings where the Rock has very little comeback if borrowers get into difficulties. Writeoffs there would balloon if Britain entered a serious downturn.

Nationalisation raises questions about the treatment of expropriated shareholders and whether the Rock has an unfair advantage over rival banks. But these will pale into insignificance if the downturn intensifies and borrowers default in large numbers. That would really test the mettle of squeamish ministers.



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Debt collection agencies and bailiffs are raking in unprecedented sums from Britain's growing mountain of personal finance misery, an Independent on Sunday investigation has found. Last year the agencies and bailiffs pursued no fewer than 20 million cases and the methods they used to squeeze money from people are so aggressive that experts ranging from the Citizens' Advice Bureau (CAB) to members of the House of Lords are now calling for legislation to curb these excesses.


A growing army of thousands of "debt chasers" is making millions from the misery of Britons who have spent years spending above their means, in what campaigners have slammed as "legalised profiteering".

Personal debt is at a record high of £1.4 trillion, averaging £29,684 for every adult in the country. And people now face the possibility of bailiffs being able to break into their homes and take possessions by force. The sweeping new powers will be outlined by the Government in May, when it publishes details of how a new Tribunals, Courts and Enforcement Act will work in practice. In a statement to the IoS, a Ministry of Justice (MoJ) spokesperson claimed that the new powers for forcing entry will be used only "as a last resort... in strictly controlled circumstances", and only "once full independent regulation of all private-sector bailiffs has been implemented". But it emerged last night that, despite bailiffs remaining unregulated, MoJ officials are proposing that they be allowed "to use reasonable force, restraint or violence against debtors thwarting the bailiff's seizure of their goods".

Although the Government pledged to regulate bailiffs a year ago, nothing has happened; the findings of a consultation on the issue that should have been published last July have yet to see the light of day. The CAB will meet policy advisers at the MoJ this week to discuss these new powers.

More than eight million Britons are in serious debt – a quarter of whom are struggling to make their repayments. Major lenders are taking legal action against people's assets, according to evidence from the Credit Management Research Centre at the University of Leeds, which warns that people's homes are also at risk.

Until now, Britain's credit boom has been sustained by rocketing house prices and a stable economy, but it has left many vulnerable to even a slight downturn in their fortunes. The Financial Services Authority (FSA) is warning of "a growing number of consumers experiencing debt-repayment problems in 2008", with mortgage repossessions and bankruptcies set to rise.

"Clearly the use of debt collection agents is on the increase because the big lenders are selling their debt to collection agents. The financial institutions want to get debt off their books quicker than they used to do," said Professor Nick Wilson, chair in credit management at the University of Leeds. "We're tending to see more court action to get charges made against people's properties and incomes."

Bailiffs are notorious for the methods some of them use. Tricks of the trade include charging extortionate fees for visits that never take place, intimidating people through aggressive behaviour, and lying about the extent of their powers to trick people into letting them into their homes or even into paying up on the spot.

But now, amid calls for tighter regulation, the powers of this controversial profession are to be widened. "It is legalised profiteering," said Lord Lucas of Crudwell and Dingwall, chairman of the Enforcement Law Reform Group, a body that campaigns for fair enforcement of debts. "It is very much like the systems of tax collections that one reads about in books from the Middle Ages. There is no effective control on what many of these bailiffs are charging."

Debt campaigners warn that government failure to regulate the debt sector could result in an escalation in confrontations with bailiffs and debt collection agencies. Peter Tutton, the CAB's national debt policy adviser, said: "We regularly see cases of bailiffs misrepresenting their powers, acting in an abusive or aggressive manner, pressurising people into paying lump sums they cannot afford, and imposing excessive fees that can drive already vulnerable people deeper into poverty and debt."

County court judgments reached 796,528 last year – a staggering increase of 48 per cent since 2004, when they stood at 538,383 – according to new figures provided to the IoS by the Registry Trust. And bankruptcy orders soared from fewer than 20,000 in 1998 to more than 62,000 in 2006.

Record numbers of people are flooding the CAB with desperate appeals for help with their debt disasters. Enquiries have shot up by 20 per cent in the past year alone, and the charity deals with 6,600 new debt problems every day. It claims that up to two-thirds of bailiffs could be guilty of harassment and intimidation, with 40 per cent accused of misleading people about their powers of entry.

Britain's debt culture has spawned a massive growth in the debt collection business. The Credit Services Association (CSA), which represents the majority of debt collection agencies, has seen its membership more than double in the past five years, from 134 in 2002 to 291 in 2007. Its members now deal with more than 20 million cases a year worth £15bn in total – triple the amount they dealt with in 2000. CSA members bought a record £6bn of debt last year, with major high street lenders such as Marks & Spencer, the Co-operative Bank and Lloyds TSB among those selling off their debts.

Owen James, managing director of Interim Justicia, a debt collection firm that has almost a million "customers" in Britain, and which had group profits of £37m in 2007, told the IoS: "We are looking forward to controlled sustainable growth... there's a lot of potential in this market."

Local authorities around the country raked in about £360m in legal fees over council tax bills alone in 2006, when four million liability orders were issued with fees ranging from £85 to £125 for each one. Debt counsellor Sheila Hardy said: "Council tax debts are a money-spinner for councils and it is an absolute scandal."

Writing in a recent industry newsletter, Steve Roberts, managing director of bailiff firm Ross & Roberts, warned that a trend for local authorities to insist that collection firms pay the council's outstanding debt before recovering the money and adding their cut would increase the pressure on some to "raise huge fictitious fees and do bogus calls".

Consumer organisations have reported incidents of fights involving bailiffs in people's homes, people being pushed over – in one case suffering a broken arm – or even having their children made to hand over pocket money to settle outstanding debts. Many people are subjected to inflated fees for phantom visits that never took place, as well as being lied to by bailiffs trying to trick their way into their homes.

And things are set to get much worse, according to the Conservative MP Henry Bellingham. "Already powers are being abused and that is going to get worse because we will have more and more people having their homes broken into by bailiffs," he warned. "This is happening as debt has increased to record levels. We have got a bailiff industry out there that's now going to be in possession of much greater powers of entry at a time when more people are going to be having problems with debt."

Vernon Phillips, director of the Enforcement Services Association, a trade body for bailiffs, responded last night: "Many of the complaints that we do receive are 'he said, she said' and there's no actual evidence." But he then admitted: "Bailiff firms are reasonable people and will acknowledge that one or two of their bailiffs might overstep the mark in their overzealous attempt to collect debts. There have been occasions in the past when members have been fined or expelled."

Attacking government suggestions that bailiffs could be regulated through the Security Industry Authority (SIA), he added: "The SIA is not a body that the industry has a great deal of faith in because basically it doesn't know what it is doing." Mr Phillips acknowledged there remained problems with some bailiffs. "Regulation would be good for the industry and drive out the minority of cowboy operators that give the majority a bad name."

The Credit Services Association (CSA), which represents debt collection agencies, is keen to play down the extent of the problems. The CSA gets hundreds of complaints each year, more than half relating to "intrusive methods" used by debt collectors. But Kurt Obermaier, its executive director, said: "There are bound to be people who aren't happy to be pursued for their debts and there are bound to be people who are complaining and trying to find ways of avoiding their responsibilities. I think that one has to accept that with the huge volume that we are dealing with there are from time to time situations that are not ideal, but as an industry we are committed to maintaining ever higher standards of practice."

'The strain got too much for her'

Beryl Brazier, a 61-year-old widow from Swadlincote, Derbyshire, drowned herself in a lake in April 2006. After her death her family realised that a mix-up had resulted in Mrs Brazier's being hounded by debt collectors chasing someone else's £17,500 debt.

Kim Brazier, her daughter-in-law, said: "The debt company has taken the life of a good woman who would still be here if the mistake hadn't been made. She did all the right things, but the letters kept coming and I think the strain got too much for her."

The Office of Fair Trading and the Information Commissioner have launched investigations into the activities of the debt companies involved in the case.

'I tried, but I couldn't keep him out'

Simon Cousins, 52, from Southend in Essex, suffers from chronic joint pain and has been unable to work since 1991.

He claims he was attacked by a bailiff chasing up a £1,400 council tax bill, who forced his way into his home last October. "I took advice from National Debtline, who told me that I did not legally have to allow the bailiff entry," he said. "When he called, I put my foot across the threshold and told him I was not going to grant him entry. He attacked me and I couldn't keep him out."

His wife called the police, who threatened Mr Cousins with arrest for breach of the peace. He said: "I was forced to pay the money there and then after having been assaulted."

'They were rude and inflexible'

Anthony Lewisohn, an 82-year-old retired judge from Cobham, Surrey, was pressured into parting with more than £500 by bailiffs who turned up on his doorstep and threatened to clamp and remove his car over a parking ticket. Letters had been sent to Mr Lewisohn's old address, so the visit came as a shock.

The former judge described the bailiffs as "thugs" and said that they could not give him proof of where or when he had committed an offence, or that letters asking for payment had even been sent to him. "They were rude and inflexible. It was very unpleasant," he said.


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The number of people declaring themselves bankrupt in Wales fell in the last quarter of 2007.

The latest statistics for the final quarter of 2007 show a 6% fall in people petitioning for their own bankruptcy, as opposed to being forced into bankruptcy by a creditor, from 673 cases in the third quarter of 2007 to 632 cases in the fourth quarter.

The three months ended December 31, 2007, saw a fall of 8% in the number of people making themselves bankrupt in England and Wales, and a dramatic decline in the use of individual voluntary arrangements, which dropped 12% in the most recent quarter, making a total fall of 27% over the past year.

IVAs enable individuals in financial distress to approach their creditors with a plan to restructure their debts. This typically involves the debtor making regular, affordable monthly payments for a fixed period of time, at the end of which the balance of the debt is written off.

The figures also reveal that 11,703 people in England and Wales petitioned the court to bankrupt themselves and 9,376 agreed an IVA in the quarter October to December 2007.

John Bangham, director of personal insolvency for KPMG’s Cardiff office, said, “This means that a total of 21,076 people took the potentially life-changing steps to place themselves into personal insolvency. This represents an incredible 90% of all personal insolvencies.

“After many years of quarterly increases, we have seen two consecutive falls. Bankruptcies where the debtor makes a positive decision to go bankrupt have fallen by 8% over the past quarter to 11,703.

“At the same time, the number of IVAs, where the debtor seeks to come to a deal with the creditors, has fallen by 12% to 9,376,” he added.

“One of the main reasons is the drop in the number of IVAs, which have come in for criticism following concerns about whether they are always the most appropriate course of action for the individual.”


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Is it just me...?

Following indications that system builder Evesham Technology had finally gone into liquidation at the end of last week, I attempted to find out for myself what its status is. As you read on you will see the results of my inquiries. They reveal not only confusing messages from Evesham itself, but also disappointing performances from the very institutions we rely on to protect us.

I initially called Evesham Technology’s technical support line on the afternoon of Monday 11th February to ask if I would, hypothetically, be able to get a PC bought from Evesham within the past year repaired. I spoke to an advisor and was told that and PCs bought from the old Evesham Technology before it went into administration on 3rd August 2007 could be repaired by Total Care and Support, although this may come at a cost.

Total Care and Support is a consumer electronics technical support and warranty cover operation. It gives its registered address as Unit 28, Time Technology Park – the same address as Digital World Group Ltd, the company that owns timeuk.com and Time UK Factory.

The advisor added that Geemore Technology Ltd, her current employer and the company that had bought Evesham Technology out of administration, had been in liquidation since the administrators – DTE Leonard Curtis – pulled out on 4th January 2008. She said that they “had been trying to keep the company going” since then but had officially stopped selling PCs on Friday 8th February. She added that former Evesham managing director Richard Austin was no longer working at the company.

So is Evesham still in business or not?

Geemore Technology Ltd is still listed as ‘active’ at Companies House. It was incorporated on 20/7/07 and lists Vale Park, Evesham as it’s registered address – the same one still listed on the Evesham website. It has only two registered appointments: Richard Robinson Austin as director and Elite Logo Company Limited as secretary. Elite Logo Company has a total of 24 company appointments and lists Unit 28, Time Technology Park as its address. Geemore changed its name to Evesham Micros Ltd 20/8/07, despite there being another, still active company registered under that name. It changed its name back to Geemore on 14/1/08, despite having announced that “Evesham Micros trading as Evesham Technology is still in business” a few days beforehand

I announced that I was a journalist and told her I would understand if she didn’t want to answer any more questions, she said “it’s fine”. I asked why the website was still live and apparently accepting orders, she speculated that maybe they hadn’t got round to closing it down yet. I asked her if she could tell me anything else she said not really, but that she would take my number and give it to Brad Heeks, who may be able to speak to me.

I invited the advisor to call me on that number herself if she had anything else to say or thought I could help at all. She thanked me and joked “can you give me a job?” She revealed that she worked for Evesham Technology and, having lost her job when it went into administration, was taken on by Geemore on a contract basis. She now expected to lose her job again.


To find out what happened on 4th January I rang up DTE Leonard Curtis. I was eventually directed to Andrew Pitts in the Bury office who told me that the only way he could accept questions from journalists was over fax. My fax was successfully sent at 17:18 on Monday 11th.

I hadn’t heard from Brad Heeks by the end of that day so I looked him up on Facebook and sent him a message saying I was a journalist and asking him if he could speak to me. After getting further clarification from me, in response to his initial query of: “Who the Fok are you?” he told me he couldn’t help but had passed my details to his general manager and asked him to contact me. To date he has yet to.


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NORWOOD, Mass. - Domain, Inc. (d/b/a Domain Home Furnishings), a 27-store chain known for quality furniture and other home décor products, will conduct a court-ordered bankruptcy liquidation sale beginning February 13, 2008. The sale was ordered by the bankruptcy court as a result of Domain’s recent Chapter 11 filing. The value of the inventory to be liquidated is approximately $20 million.

The Domain liquidation is being managed jointly by two leading national retail liquidation firms: Hudson Capital Partners, of Newton, Mass., and Great American Group, of Los Angeles.

“Domain has been a landmark for consumers who appreciate high quality home design, and the liquidation sale provides a final opportunity to take advantage of this incredible home furnishing resource,” noted Hudson Capital Partners co-founder Jim Schaye.

The Domain merchandise to be liquidated will include furniture, accessories, décor items, lighting, rugs and other designer products. The sale will involve all Domain store locations in Massachusetts, Connecticut, New Jersey, New York, Pennsylvania, Maryland and Virginia.

Following the liquidation sale, which is expected to take several weeks, all of the Domain retail locations will be closed. Domain, Inc. filed for bankruptcy on January 18, 2008 in the U.S. Bankruptcy Court, District of Delaware (Docket #08-10132 PJW).

About Domain

Domain Home is an upscale retailer of unique and high quality home furnishings. The Company has 27 retail locations from Boston to Washington, D.C., located in high-end malls, lifestyle and freestanding shopping centers. For more information on Domain, visit www.domain-home.com.



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Geoff Huffer, trainer of last year's dual Guineas winner Cockney Rebel, is at risk of imminent bankruptcy over an unpaid debt of £12,000. The news casts light on Huffer's surprise decision to retire in October, when he said: "It makes sense to go out now, at the top." He owes the money to Stablecare, a company that provides laundry services to stables in the Newmarket area.
"The guy must have money. He's just been to the Maldives," said Kevin Moorcroft, managing director of Stablecare, adding that non-payment of bills is endemic among "the smaller trainers". Moorcroft obtained a judgement from Ipswich County Court last month and has instructed a solicitor to prepare a petition for bankruptcy. He claims Huffer has offered to pay £5,000 on several occasions but has produced nothing so far.


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TWO men have denied misconduct by a company undergoing winding-up procedures.

Ian Robb, 52, and Duncan Robb, 47, face prosecution by the Department of Business Enterprise and Regulatory Reform.

The charges relate to documentation allegedly not passed on, relating to In-Car Solutions, with premises in Maxwell Street, South Shields, and High Northgate, Darlington.

Ian Robb, of Moor Lane, Cleadon, and Duncan Robb, of Cornsay Village, County Durham, appeared for a short plea hearing at Durham Crown Court yesterday.

They both denied misconduct in the course of winding up of the company between July 19 and December 1, 2004.

Both also pleaded not guilty to a second charge alleging they failed to comply with an office holder.

In both cases, it is said they failed to pass on relevant information about the company to the liquidator, in breach of the Insolvency Act of 1986.

Both men were bailed to return to court in the week of June 2.

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Pickfords, Britain's oldest and largest removals company, is on the verge of a fire sale to avoid a financial crisis that would put up to 1,300 jobs at risk, The Times has learnt.

The loss-making company is trying to sell some or all of its business as it seeks to secure additional funding to help to pay staff and creditors.

If it failed, Pickfords would become the first high-profile British casualty from the slowdown in the UK housing market and the collapse of the American property sector.

Pickfords, which is registered in Britain as Sirva UK Limited, managed to pay its January wage bill two weeks ago with a £350,000 cash injection from Sirva Inc, its troubled American parent, according to company filings. Pickfords' US parent, part-owned by Clayton, Dubilier & Rice, the private equity firm, filed for Chapter 11 bankruptcy protection last week, adding to the pressure on the UK business to find a cash injection to keep Pickfords afloat while it seeks a buyer.

Pickfords, which dates back to a 17th-century Pickford family packhorse business, is suffering from what its American parent called “significant short-term cash obligations. If a solution is not found to the short-term funding requirement, the directors of Sirva UK Limited must consider filing for an appropriate UK insolvency procedure.”

Talks are under way to sell parts of Pickfords to a London-based company. The buyer would take the UK group's assets in return for “taking on certain liabilities”, Sirva Inc said in documents filed with US regulators. Without extra cash, Pickfords may be forced to try to sell itself “in an insolvency procedure, for example administration”, company filings said.

Brad McCarthy, Pickfords's finance director, said that the company had sufficient cash to pay its staff this month. The payment from its US parent, he said, was “nothing out of the normal ... Quarter one for the moving industry is quieter and we send money to them in busier times - it is the same as has been happening in the past ten years.”

Administration would afford Pickfords similar protection from creditors as that granted to its American parent through Chapter 11 bankruptcy, but Pickfords's management would hand control of the British business to an independent insolvency expert.

“If the sale cannot be completed at all, the company [Sirva Inc] will likely wind up the UK and Irish businesses pursuant to an appropriate UK insolvency procedure,” Sirva Inc said.

However, Mr McCarthy said: “I am very confident at this stage. There is no issue of short-term cash. We have a number of alternatives. I can say with a reasonable level of confidence we are able to find those needs.”

Sirva UK made a post-tax loss of £1.7 million for the year to December 31, 2006, on turnover of £88 million, after accruing post-tax losses of £15 million and £30 million in 2005 and 2004.

Mr McCarthy said that the Pickfords UK removals business and the group's Irish insurance business together made a loss of about £1 million in 2007 and he forecast combined losses of about £1.5 million in 2008.

“We are experiencing a difficult first half of the year due to the housing market, so we are not expecting to improve from 2007. Current trading volumes are above where we expected as we were pessimistic on quarter one,” he said.

Sirva UK has a deficit in its defined benefit pension scheme of about £10 million and has agreed with pension trustees to pay £1.6 million per year into the scheme over ten years, starting in April 2008, company filings indicated.

Sirva UK is owned by Sirva Holdings, whose latest published accounts record £34.8 million of pre-tax losses on turnover of £139.8 million for the 63 weeks ending March 13, 2006. That followed a £32 million pre-tax loss on £157 million of turnover for the year to December 25 2004. Sirva Holdings registered total liabilities of £151 million at March 13, 2006.

Sirva Inc obtained court approval last week for $150 million of emergency funding from JPMorgan, its main bank lender, as part of its move into debtor-in-possession bankruptcy protection for between 60 and 90 days. That loan matures at the end of June.


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Northern Rock was officially reclassified as a public enterprise yesterday in a move that means one of the Treasury's cherished rules for the public finances has been breached.

The Office for National Statistics said it had taken the decision to designate it a state entity because the size of the government's support for the stricken bank meant it had effective control. The move has the effect of bringing up to £100bn of Northern Rock's liabilities onto the national debt.

Although the Treasury said the move was only temporary, it means that one of Gordon Brown's two fiscal rules - that public debt should not exceed 40% of gross domestic product - will be broken. The national debt stands at £537bn, equivalent to 37.7% of GDP. The ONS said the reclassification would add 6.7 percentage points to that figure, taking it to 44.4%.

This is more bad news for Chancellor Alistair Darling, who is struggling to keep public finances under control and is due to present his first budget on March 12.

Shadow chancellor George Osbourne said: "This means that a lot more debt is going onto the public balance sheet, and we as taxpayers are all more exposed to the problems of Northern Rock."

Northern Rock turned to the Bank of England last September after the credit crunch left it unable to borrow through money markets. In an attempt to calm panicking savers, the government guaranteed all deposits in the event of a collapse.

The Treasury is trying to find a buyer for the lender, prompting critics to claim it is under public ownership and should be nationalised. The ONS said its decision did not mean that the bank had been nationalised and government guarantees to the Rock would not be included in the public accounts.

"The financial liabilities of Northern Rock are substantial," the ONS said, but the exact impact of the move on the public finances was not yet clear and would not take effect until March at the earliest.

Vince Cable, the Liberal Democrats' Treasury spokesman, said it underlined the importance of ensuring that the loans made to Northern Rock are repaid. The Treasury said the reclassification would have only a temporary impact on the public finances and the government's fiscal rules were flexible enough to deal with such cases.

The ONS said the Bank of England would also be included in the public finances at the same time so that transfers between it and the Rock could be "netted out" as they are taking place between one public corporation and another.

It said government guarantees in relation to Northern Rock's borrowings and depositors were classified as contingent liabilities for national accounts purposes and therefore, in line with international standards, they would impact on the public books only if they were called upon.

Analysts said that though the breaching of the fiscal rules was awkward for the Treasury, it was likely to be temporary. But they urged it to publish figures with and without the Northern Rock exposure.


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THE number of people whose homes were repossessed last year rose by 21 per cent, but repossessions are just one indication of the UK’s deepening debt crisis.

The scale of individual debt, both through mortgages and other debts such as credit cards and personal loans, has increased sharply over the last ten years. By the end of December 2007, total lending to individuals reached £1,409 billion, figures from the Bank of England show.

Of this £1,409 billion, £1,185 billion was mortgage lending with the remainder £224 billion consisting of consumer credit including credit cards.

This compares to the £419 billion of secured debt and £84 billion unsecured in May 1997.

This mountain of debt is taking its toll with Britons defaulting on unprecedented amount of loans. More than one million have fallen behind on interest payments, according to the Financial Services Authority, and another two million are “continually struggling”.

The debt advice firm Debt Free Direct estimates that between one and two million households are “permanently indebted” — meaning that while managing to juggle their debts and meet minimum interest payments, they will never repay the principal.

In 2006, it is estimated that UK banks wrote off an unprecedented £6.6 billion of loans to personal customers. That is 20 per cent higher than in 2005, which itself was 50 per cent higher than 2004.

The latest statistics from the Insolvency Service on bankruptcies and individual voluntary arrangements - private agreements between debtors and creditors that allow borrowers to avoid bankruptcy - show a quarterly fall in the number of individual insolvencies, though some experts fear this is just a blip in a longer term rising trend.

There were 24,846 individual insolvencies in England and Wales in the fourth quarter of 2007, a decrease of 3.9 per cent on the previous quarter and a decrease of 16.4 per cent on the same period a year ago.

While IVAs at 42,165 were 4.9 per cent lower than in 2006 when they stood at 44,332, bankruptcy orders, at 64,480 were 2.4 per cent higher than in 2006, when the figure was 62,956.

Mike Gerrard, head of personal insolvency at Grant Thornton, says: "Take no heart from this quarter's drop in personal insolvencies, they are merely the tip of the iceberg. From here on in it's going to be a rough ride for many individuals and the numbers going insolvent will rise."

Mr Gerrard believes insolvencies will rise as the credit crunch, slowing consumer confidence and the lagging effects of past interest rate rises finally begin to feed into the statistics.

Despite this gloomy outlook, there are some signs consumers are beginning to adapt their spending behaviour in response to today’s tougher conditions.

Latest figures from APACS show that although spending on plastic over Christmas was £32.2 billion, and that this is up four per cent on Christmas 2006, the 2007 figure marks the slowest year on year increase in spending over the same period for four years.


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Kerry Katona faces bankruptcy within just 30 days after failing to pay a huge tax bill.

Pregnant Kerry missed a £380,000 instalment on a £1.2million debt.

And The People has learnt papers have now been served on the troubled ex-Atomic Kitten singer giving her a month to cough up.

A source said: "It's reaching crisis point - unless she acts quickly she will be declared bankrupt.


"She's forking out for cars and a flash lifestyle, yet thinking she shouldn't pay taxes like the rest of us."


Kerry was handed the £1.2million bill last year.


But the mum of three claimed she could not pay it in one go - despite earning £2million a year from ads, books and magazine deals.


She and cabbie husband Mark Croft, 37, drafted in insolvency advisors, saying they had huge credit card bills and thousands of pounds of other debts.


Tax chiefs agreed to spread the payments - and Kerry handed over £380,000 as a first instalment. But the second whack is now overdue.


Papers were served last week to her £1.5million mansion in Wilmslow, Cheshire, summoning her to a second hearing.


The source said: "The papers basically say pay up in 30 days or you will be declared bankrupt."


Last month, though, the star proved she was far from skint by buying a new £127,000 Ferrari for Mark.


And her Christmas gift to him a month earlier was an £11,000 Ducati superbike.


The couple also have a £135,000 Lamborghini, a £100,000 Aston Martin, an £80,000 Porsche 911 and a £55,000 Mercedes.


In September, Kerry paid £50,000 to fly family and pals to Italy to see her renew her wedding vows to Mark.


She has also splashed the cash on partying. And she's still paying out in her ongoing custody battle with her Westlife ex-hubby Brian McFadden over their daughters Molly, six, and Lilly-Sue, five.


But her earnings are just as high.


Ads for Iceland stores are worth £750,000 a year - though bosses have now ditched Kerry to go for a different image.


She gets £400,000 a year from a magazine column.


And she has more cash coming in from an autobiography, an advice book and a novel.


Kerry has also signed up for an MTV show about her life called Crazy In Love.


A pal said: "She is useless with money. She has no concept of saving and spends whatever she feels like.


"It's not on - she needs to get real."


But there are signs Kerry IS trying to economise.


A bash after baby Heidi's christening in Warrington was a £13-a-head buffet - at a local curry house.


A spokesperson for Kerry said: "She has buried her head in the past over this. She has paid out £250,000 in unpaid tax and now intends to make a further two payments before the deadline."



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Northern Rock will appear on government accounts, the Office for National Statistics has decided.
The decision from the Office for National Statistics (ONS) had been widely expected as a result of the government's rescue package.

It means the government may be at risk of breaking its rule to keep net debt below 40% of national income.

The ONS stressed that the statistical change to public status should not be confused with nationalisation.

'In charge'

Under the change, Northern Rock is to be classified as a public financial corporation for statistical purposes.


This means that the ONS judges that the government is in charge of Northern Rock's "general corporate policy".

"This is largely due to powers that the Bank of England has taken as part of its secured lending facility arrangements," the ONS said.

It gave examples of the things that Northern Rock cannot do without government permission - such as corporate restructuring, making dividend payments and buying or selling certain types of assets.

'Risk of loss'

The BBC's business editor Robert Peston reckons Northern Rock could add up to £100bn to the national debt, mostly secured against the mortgages of the Rock's customers.

"Even so, a portion of that £100bn is genuinely taxpayers' money at real risk of loss, because the value of those assets could turn out to be less than the government hopes."

"However, it's impossible to assess that risk of loss with scientific precision," Robert Peston said.

The statistical change will be backdated to 9 October 2007, which was when the Treasury extended its guarantees to cover new savings deposited at Northern Rock.


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More than 10 million people may default on repayments for mortgages, credit cards or personal loans by the end of the year.

A forecast from one of Britain's biggest accountancy firms, says that "the merry-go-round of credit is about to stop", as millions of people realise their take-home pay is not enough to service their debts.


Britain is more indebted than any other country in Europe


According to KPMG, 22 per cent of those adults with debts - equating to 6.6 million - are already finding it difficult to meet their repayments.

However, 35 per cent - or 10.6 million - are worried they will find it even more difficult to pay back their debts in a year.

The figures come from a KPMG survey conducted by YouGov and commissioned by the ITV documentary Repossession, Repossession, Repossession.

The programme, to be shown on Wednesday night, is presented by Jeff Randall, The Daily Telegraph's Editor at Large, and exposes how a decade of cheap credit and rising house prices have conspired to leave millions of people with insurmountable debts.

Consumer debts have trebled in the past decade with each household in Britain owing £51,730 on average - a total of £1.345 trillion. The country is more indebted than any in Europe.

Steve Treharne, a partner at KPMG specialising in insolvency, said: "In my view 2008 will the year the chickens come home to roost. A lot of people have been living the life of Riley on credit. They have been able to borrow at 0 per cent finance, and been able to take out new cards at will.

"This is all going to have to stop. It is unsustainable," he said, arguing that not only are house prices - on which much of the debt has been secured - set to fall, but also that banks have already started to cut back on extending credit.

Last week, Egg wrote to 160,000 of its customers saying their cards were going to be stopped.

This move followed a similar tightening of credit terms by Barclaycard, Britain's biggest credit card lender, which has lowered the credit limits for half a million of its customers.

Mr Randall, who as part of the programme met people who had been driven to the point of suicide by their debts, said: "What we believed was widespread economic prosperity turns out for many to have been an illusion, funded by excessive debt."



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THE boss of a Greater Manchester debt advice firm has hit out after figures showed the number of people declared insolvent fell for the first time in nine years during 2007.

David Mond, chief executive of AIM-listed ClearDebt, said unnecessary intransigence from creditors such as banks caused the decline, by refusing to sanction many individual voluntary arrangements to consumers.

This meant thousands more people sunk further into the mire as they struggled with their credit card, storecard and other debts, he added.

The number of IVAs fell nearly five per cent following a long-running dispute between creditors and providers. The wrangle, which was resolved last week with the agreement of an IVA protocol, led to around one in six applications being turned down by creditors.

Mr Mond, whose business is based in Timperley and operates mainly via the internet, said: "IVAs have fallen again for one very simple reason - there are creditors, and creditors' agents, out there who have taken the unilateral choice to reject IVAs no matter what the case in hand offers - no judgement, no analysis.

"This has caused a massive level of distress to over 16,000 people according to our projections. They have not gone into bankruptcy or an IVA - just been allowed to get into more debt due to creditor intransigence."

Mr Mond added: "ClearDebt believes these figures clearly show that IVAs have been unnecessarily blocked in the past but we are hopeful that the protocol agreement will allow the insolvent debtor to access the most appropriate debt solution, rather than sink further into a mire of debt."

Nationally, the total of 106,645 people who were unable to keep up with their debts was 0.6 per cent down on 2006, but still the second highest figure on record, the Insolvency Service said. At the same time the level of bankruptcies jumped by 2.4 per cent during the year.

Experts warned that the fall in insolvencies was the lull before the storm, with most expecting the number of people unable to keep up with their debts to begin climbing again this year.

They expect insolvencies to reach a record level during 2008, as already overstretched consumers struggle to cope with rising living costs and higher mortgage repayments for people coming off low fixed-rate deals.

The figures also showed that the number of people declared insolvent fell for the fourth quarter in a row during the final three months of the year.

A total of 24,846 people were declared insolvent in the three months to the end of December, 16.4 per cent fewer than in the final quarter of 2006.

Within the total, bankruptcies fell by more than eight per cent year-on-year, while IVAs dived by 27.3 per cent, probably as a result of the ongoing dispute.



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The number of people becoming bankrupt in Wales has doubled in six years official figures indicate.
According to insolvency statistics, in 2000 just over a 1,000 bankruptcy orders were made in Wales.

But the latest figures are expected to show that by the end of 2006, that number will be in excess of 2,000 bankruptcies.

The Welsh Centre for Credit Counselling says it has seen debt inquiries leap from 1,000 a year to 6,000 in 2007.

The Liberal Democrat MP for Ceredigion, Mark Williams, who asked the UK's business secretary for a breakdown of insolvency figures in Wales, said he is becoming increasingly concerned by the issues.

"This is a real problem and I think we have got to look at three particular areas," stressed Mr Williams.

"One is financial education, which to be fair to the government, it is now considering.

"One is the issue of building and promoting independent advice in a far more positive way than we have done before.

"And thirdly, and most fundamental of all, we've got to look at the practices of loan sharks and the outrageous way they are able to operate."

According to the Citizens Advice Bureau (CAB), consumer debt is a growing problem.

"In Wales, we've seen a 20% increase in clients coming to CAB for help, and we've seen an increase of over 30% of clients for information on bankruptcy," said Joe McShane from CAB.

Repossessions

The housing charity Shelter said its own figures also showed that the number of borrowers struggling to meet mortgage repayments has soared by 700%, while the Financial Services Authority has already warned it expects home repossessions across the UK to rise by 50% in 2008.

However, Wales' Social Justice Minister, Dr Brian Gibbons insisted that the assembly government was determined to help educate the public about their personal finances.

"In our schools we're trying to introduce changes in the curriculum so that young people will be better informed about how to use credit," said Dr Gibbons.

"We are trying to establish credit unions, for example, in all schools. We're trying to increase the use of credit unions in our communities across Wales so that people will be able to get access to savings.

"And equally, we are taking action with the UK government on rogue lenders and people who are operating outside the system, loan sharks and so forth."



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There's a myth that the huge growth in personal bankruptcies over recent years is all about our spendthrift, have-it-all culture. The argument goes that the numbers published today for 2007, which almost match the record figure for 2006 of 106,000, are chiefly made up of men and women who bought too many shoes, swapped their old TV for an LCD flat-screen and ordered a new kitchen when they were bored of the last one.

Yet most people are forced into bankruptcy by a finance industry that bamboozles them with complex loans that are riddled with tripwire clauses. It is these clauses that generally push people over the edge.

Most people in a suburban semi will struggle to spend more than £10,000 on a new kitchen or conservatory. As for shoes, while there are studies that show some of the rise in insolvencies is due to people blowing thousands of pounds on high living, it is difficult to spend more than £10,000 on a credit card without noticing.

The chief problem comes when the 0% teaser rate on the credit card runs out and a 17.5% rate kicks in. The bank tells the borrower not to worry and persuades them to switch their debt into a personal loan; then they are locked in. If their income varies at all over the next three or five years and they miss a payment, they will start to be whacked by fees and charges. If they have succumbed to an advert on daytime TV or the back pages of a red top newspaper, the fees and charges are levied from the outset. If the borrower opts for another credit card, it is usually to pay off the old debt rather than just keep spending.

For most people who end up in the bankruptcy courts, a standard £10,000 loan is the starting point for unmanageable debts of £50,000 and more.

The insolvency figures for the last three months of 2007 saw a noticeable slowdown against the last three months of 2006. Most of that relates to a dispute between the banks and the ambulance-chasing IVA firms that sell a fixed five-year insolvency plan. The banks have blocked customers using IVAs because they hate the charges imposed by the IVA firms and the claims they make to negotiate away up to 80% of the debt, at the bank's expense.

A hiatus in the number of people taking IVAs is unlikely to last, though. According to most professionals in the insolvency industry, a combination of the credit crunch that is restricting lending across the board, and the banks' determination to reel in the backlog of "debts", will push the numbers up again over the next year.

Will this trigger the UK's own sub-prime crisis? At the moment that possibility looks remote. Talk to the Bank of England and it is sanguine about the effects on the economy. A report out yesterday from the National Institute for Economic and Social Research said fears for the economy were overstated. The independent thinktank said that outside the finance industry in London, commerce and industry was in good shape.

The tragedy is more for the people involved. They are not, in the main, spendaholics who have been served their just deserts. They work on short-term contracts that are not renewed. They are the recently divorced and the poorly educated. They bought Christmas presents in hope that something would turn up to pay the bills. They are financially illiterate in a world where the sale of loans is becoming ever more complex.



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Government measures to help consumers manage their growing mountain of debt have come too little too late, according to insolvency experts at Midlands law firm Browne Jacobson.

Findings by price comparison website uSwitch revealed that as many as five million people, or one in 10 adults, spend more than they earn on a monthly basis. A further one in five consumers have no spare money left at the end of the month and half of those living beyond their means rely on overdrafts and credit cards to plug the gap.

The Government recently introduced plans that would allow consumers with debts to take out a court order enabling them to have a break from making repayments. Under the radical new proposals those who fall into financial difficulties through a change of circumstance, such as losing their job or divorce, will be able to stop making payments on personal loans, credit cards and other debts for up to a year by applying for an Enforcement Restriction Order.

In the majority of cases, interest on the debts would continue to accrue during an ERO but borrowers would not be hit with penalty charges or other fees while the order was in force.

Payments to creditors would cease and creditors would be barred from taking enforcement action without the permission of the court.

Not all debts would be included in an ERO. Child maintenance, student loan and mortgage payments will be excluded. Utility bills, rent arrears and council tax may also be excluded. There would be no upper limit on the debts that could be included in an ERO but the debtor must be able to show that they can continue making payments once the ERO comes to an end.


Vicki Dunstall, an expert in insolvency at Browne Jacobson, said: "These latest findings come amidst widespread concerns that higher debts may push more people into insolvency this year. For many people the proposed changes will be too little too late. We have had constant warnings about the mounting debt problem for years but it appears that both consumers and the Government have done little to curb spending habits.


"With the credit crunch now in its ascendancy and billions being wiped off the price of stock markets around the world there will be many people saying we told you so.


"Government plans to give those in debt a temporary reprieve will herald one of the most profound developments in UK bankruptcy and insolvency legislation in recent years. EROs will provide an alternative to bankruptcy and individual voluntary arrangements but will not be available until 2010.


"The other big loser under the Government's plans will be the payment protection market, a sector that is already under investigation by the Competition Commission for its low claims ratios and high commission rates.



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Bankruptcy orders rose 2.4 per cent over 2007 – with 64,480 people going under.

In total there were 106,645 insolvencies last year – new figures from the Insolvency Service (IS) reveal – with 42,165 people filing individual voluntary agreements (IVAs), a fall of 4.9 per cent.

However, the fall in IVAs is not being attributed to Britons getting their finances in order, but banks being less willing to accept the agreements.

In the last quarter of 2007, the effects of banks tightening their lending criteria in the so-called credit crunch did not seem to hit insolvency figures – although a rise in bankruptcies is expected in 2008.

Mike Gerrard, head of personal insolvency at Grant Thornton, said: "Take no heart from this quarter's drop in personal insolvencies, they are merely the tip of the iceberg.

"From here on in it's going to be a rough ride for many individuals and the numbers going insolvent will rise."

The last three months of last year saw 24,846 individual insolvencies in England and Wales - a 3.9 per cent fall from the previous quarter and a 16.4 per cent fall on the end of 2006 - with both bankruptcies and IVA levels decreasing.

However, Grant Thornton has already seen a "marked increase" in debt advice enquiries since Christmas.

Mr Gerrard said: "It's a tough climate out there with forecasts for a rise in inflation and a slowing economy, and that will inevitably flare up the insolvency figures over the next few quarters.

"We've probably seen the last of any decreases in insolvencies for at least the next six months."

The Insolvency Service also revealed a shift toward those in debt trouble filing bankruptcy petitions themselves.

In the fourth quarter of 2007 83 per cent of bankruptcies were made on the petition of the debtor, compared with 53 per cent in 1998.

However, credit rating agency Experian is warning people not to think of bankruptcy as an easy way out of debt.

James Jones, consumer education manager at Experian, said: "We want to make sure consumers are aware of the serious implications of choosing insolvency as a way out of money troubles, particularly as opting for bankruptcy or an IVA will affect your ability to obtain credit and other financial services for years to come.

"Also, because details of bankruptcy orders and IVAs form part of the ‘public’ information on your credit report, the information is often seen by landlords and employers who you allow to make a check, so choosing the insolvency option could affect your chances of renting a home or getting the job you want."

Analysis by Experian shows people in the lowest income groups – with lowest assets and most likely to find borrowing difficult as banks tighten lending – are most likely to face bankruptcy.

However, young families with children in mid-market terraced and semi-detached properties are more likely to choose IVAs.

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