The number of people whose homes were repossessed surged by a third during the first half of the year - with an average of 77 properties being lost every day.

The rate is now at its highest for eight years, with interest rate rises leaving many homeowners struggling to meet mortgage repayments.

Banks and building societies seized 14,000 properties - a 30 per cent increase on the same period a year ago.

advertisementThe figures from the Council of Mortgage Lenders last week came as separate data showed personal insolvency levels had fallen. However, financial experts warned that people were merely shifting their debt from credit cards onto their properties.

Louise Brittain, head of personal insolvency at accountancy firm Baker Tilly, said the figures did not reflect the three interest rate rises this year. "That's when we'll have a disaster on our hands," she said.

Credit card debt has been slowly falling for the last 18 months as consumers have paid off a glut of cheap loans that the banks were willing to offer between 2000 and 2005.

However, David Stubbs, a senior economist at the Royal Institute of Chartered Surveyors, said: "With the housing market slowing into 2008 and interest rates expected to hit six per cent, homeowners slipping behind with their repayments may be left stranded, unable to sell their way out of trouble."

Most economists predict the Bank of England will raise rates from 5.75 per cent to six per cent in September or October in an effort to curb inflation.

This would mean that a homeowner on a £200,000 variable rate mortgage would have to find an extra £3,000 at the end of the year - far in excess of most wages increases.

Pat Boyden, a partner at the accountancy firm Price Waterhouse Coopers, said: "For someone already in big trouble, finding just another £60 a month can be enough to tip them over the edge. "

Repossessions are still well below the levels of 1991, when 76,000 properties were repossessed, at a rate of 208 a day.

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RECORD numbers of Scots are going bankrupt as the nation's debt crisis worsens, figures revealed yesterday.

In the second quarter of this year 1,606 people in Scotland went bankrupt - up 23.1 per cent on the same time in 2006.

And a growing number of Scottish businesses are also failing, according to the latest government statistics.

Analysts blamed interest rate rises and more people turning to consolidation loans to deal with a large number of debts.

Yesterday, UK-wide figures also revealed the number of homes being repossessed surged by 30 per cent during the first half of the year.

Homeowners have had to deal with five interest rate rises in the past year, with those on fixed-rate loans facing huge payment hikes when their deal ends.

The Council of Mortgage Lenders said 14,000 homes in the UK were repossessed during the six months to the end of June - 18 per cent more than the previous six months and 30 per cent above the same period of 2006.

Figures for Scotland showed sequestrations - the Scots version of bankruptcy - stood at 1,606 in the three months to the end of June

against 1,505 in the previous three months and 1,305 during the same period of the previous year.

In addition, between April and June some 1,892 Scots entered a protected trust deed - a voluntary agreement to pay a proportion of the outstanding sums. This was down from 1,966 the previous quarter.

In total, the figures mean almost 14,000 Scots have gone through a formal insolvency process in the past 12 months.

Matt Henderson, a business recovery and insolvency partner at Johnston Carmichael, Scotland's largest independent chartered accountancy firm,

said the "aggressive marketing" of debt relief products by companies offering to consolidate people's debts were partly to blame for the insolvency figures.

"People with debt problems are constantly being enticed by advertising messages about consolidating all their debts into one 'easy' monthly repayment," he said.

Andrew Kennedy, head of personal insolvency for KPMG in Scotland, said the figures signalled an alarming trend.

"With five interest rate rises in the last year, the pressure on consumers shows no sign of letting up," he added.

Yesterday's figures also showed 199 Scottish businesses went into liquidation, receivership or administration in the second quarter of 2007, up 17.1 per cent on the same period last year. Businesses have been hit by rising interest rates and higher utility bills in the last two years.

Susan McPhee, head of social policy at the Citizens Advice Bureau, said debt was a huge problem in Scotland.

"In the last financial year we dealt with £211 million worth of debt, compared to £163 million in the previous year," she said.

Shelter Scotland also expressed concern over the rise in repossessions across the UK.

The charity's director, Archie Stoddart, said: "With further rate hikes predicted this year, thousands more homeowners face the misery of repossession and homelessness."

A Scottish Executive spokesman said: "The government is determined to prevent homelessness wherever possible and there are a number of measures in place to assist those who are struggling with their mortgage repayments."

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UK personal insolvencies were down for the first time in almost six years last quarter. But the bad debt boom is far from over...

Personal insolvencies fell 8.1% last quarter compared with the first three months of 2007 as 26,956 individuals went bankrupt or kicked off an IVA ( an Individual Voluntary Arrangement is an agreement between a debtor and his or her creditors which freezes debt interest and slashes the repayment amount).

In other words, for the first time in nearly six years, fewer Britons have gone bust.

It's tempting to believe this might be the turning point for the British borrower. But also, probably wrong.

For one thing, the year's first quarter is, for many, debt hangover time after the Christmas and New Year max-out party. Personal insolvency is caused by unmanageable and worsening amounts of unsecured debt. People go through hoops to pay it off but many eventually throw in the towel. So why not start the New Year with a clean slate?

For another, the figures are still 4.2% up on the same quarter last year. And remember that there were almost as many personal insolvencies in the last quarter alone as in the whole of 2002. And a closer analysis of today's figures shows that the big fall (15%) was in IVAs, unlike bankruptcies which dropped just 3%.

Why? Because a number of the big creditors have been unhappy with the way that IVAs operate. They believe IVAs have been too 'debtor friendly' and have been taking a tougher standpoint.

The banks have recently been putting a positive spin on what they euphemistically call their 'impairment charges', i.e. the amounts of money they've lent, but won't be getting back due to debtors defaulting on loans. What the banks have been doing is tightening both their lending criteria and their attitudes to distressed debtors.

The IVA industry is currently working to sort out the issues of cost and supervision of this form of debt management. When the lenders become satisfied that these issues are resolved satisfactorily, IVA numbers are likely to take off again.

That's because there remains a huge unsecured debt mountain out there. £214bn of it at the end of June, to be precise. And it's causing more problems than ever before. Money monitor Credit Action tells us that Citizens Advice Bureaux debt advisors were 15% busier in January 2007 than in January 2006 and have dealt with 1.4m debt problems in the past 12 months. That's 11% up on a year ago and double the figure just eight years ago.

It also equates to 5,300 new debt problems a day. More than 160,000 people contacted the Consumer Credit Counselling Service (CCCS) in the first half of this year - an increase of 18.5% on the same period last year. According to research by the Conservative Social Justice Policy Group, British consumers are on average twice as indebted as those in Continental Europe.

Another equally worrying home truth emerged today: UK house repossessions have reached their highest level in eight years according to the Council of Mortgage Lenders (CML), with 14,000 Britons losing their homes in the six months to June 30, up nearly 30% on the same period a year ago. And yes, you've, guessed the reason. It's that sub-prime problem again, namely home loans to consumers with poorer credit ratings, but this time it's right here in the UK.

Whilst the CML insists that the repossession numbers are low by historical standards, until recently borrowing has been cheap. But as few mortgage holders need reminding, the cost of servicing your home loan is climbing. And with so many fixed-rate deals expiring over the coming months, a lot of sharply higher mortgage bills are on the way.

Already, mortgages in arrears in the first half of the year rose 4% to an estimated 125,100. As the full impact of higher borrowing costs feeds though the system, hitting mortgage borrowers whose disposable income is getting squeezed from all sides, home repossessions could soon be rising a lot higher.

As for personal insolvency, it was initially encouraged by softer, less stringent debt laws. Now it has a momentum all of its own.

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Home repossessions jumped 30 per cent year-on-year in the first half of 2007, raising further concerns about the impact of higher interest rates and the risks of the subprime market. However, the number of people declaring themselves insolvent fell.

The rising number of repossessions together with the fall in insolvencies was seen by analysts as evidence that mortgage debt was proving more of a strain on consumers than credit card borrowing and personal loans.

Data published on Friday by the Council of Mortgage Lenders, the industry body, indicated that UK consumers are struggling with the five recent interest rate rises which have led to a jump in repossessions.

The number of homes being possessed jumped to 14,000 in the first half of 2007 against 10,800 in the first half of 2006.

The CML said another factor was the rise in subprime mortgage lending to consumers with patchy credit histories. This type of lending now accounts for about 8 per cent of the UK market and involves lending to riskier customers who are more likely to default.

The pressure on home owners is likely to increase as 2m borrowers face a jump in payments in the next 18 months as they come to the end of cheap fixed-rate mortgages and switch to new higher rates deals.

Michael Coogan, director-general of the CML, said: “The sharp rise in repossessions in the first half of this year has been driven by a combination of factors, but the absolute number of repossessions is still low by historical standards.”

The CML pointed out that the figure is much lower than the 76,000 homes repossessed in 1991 at the height of the last recession.

However, Peter Tutton, Citizens Advice policy officer, said the problem was growing. “Local Citizens Advice Bureaus are seeing more people who are falling behind with mortgage payments and, in some cases, threatened with repossession, and we know some people are taking on mortgages that push them to the absolute limit.

“But our evidence also suggests that lenders are sometimes taking possession action as a routine response to arrears, instead of as a last resort.”

Meanwhile new figures from the Insolvency Service showed 26,956 people declared themselves insolvent in the second quarter, a decline of 8.1 per cent against the first quarter of 2007.

Malcolm Hurlston, chairman of the Consumer Credit Counselling Service, a debt advice charity, said that the biggest problem for consumer borrowers was no longer credit card debts, but the rising cost of mortgage debt.

However, Mike Gerrard, head of personal insolvency at Grant Thornton, gave warning that the latest figures were not the turning point.

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Two Bear Stearns hedge funds filed for bankruptcy protection, while investors in a third fund managed by the Wall Street bank were barred from withdrawing their money amid concerns that the credit crisis is spreading to other parts of the economy.

The bankruptcy filings headlined a raft of horrendous news for the $1.5 trillion (£740bn) global hedge fund industry and fanned fears of a profound global market correction that could reverberate into sectors far beyond America's sub-prime mortgage market, where the problems began. For the second time in a week, the FTSE 100 index suffered a major one-day fall, shedding 110 points, or 1.7 per cent of its value. Last week, the benchmark index had its biggest one-day drop in four years.

Yesterday's rout was set off by fresh concerns about the US credit market. Sowood Capital Management, which manages some of Harvard University's endowment, informed investors that it had lost about half of the $3bn that they had invested with the firm due to wrong bets on risky loans in America. Macquarie Bank, the Australian investment bank, told investors in two of its hedge funds that they were likely to lose a quarter of their cash. Shares in Man Group were hammered after it revealed poor weekly performance, too.

More pain is on the horizon, fund managers said. That is because most investment funds provide a monthly performance update to major investors. Industry insiders expect the numbers for July to be particularly poor. Jeff Meyer, chief executive of Gartmore, a London firm that manages more than £25bn, said: "The June marks were okay, the July marks are going to be worse. So in the first two weeks of August... you're going to see more of this stuff then. You're going to see more underperformance."

Those reports could lead to billions of outflows from the industry as investors seek safe havens. The hedge fund industry has achieved explosive growth in recent years on the promise of "absolute returns" - the idea that they will produce returns regardless of what happens in the larger market. Funds managed by the industry have tripled in the past six years. The quest for absolute returns sometimes means taking aggressive positions that leave them exposed when sudden shifts occur.

What began as a spike in losses for banks who granted mortgages to risky borrowers in the US caused the institutions that buy these loans in large packages to drastically re-evaluate how much they were worth. That crisis of confidence has percolated through the market, with investment banks becoming less willing to provide large debt packages that have funded the buyout boom of recent years. That has in turn deflated share prices that were propped up by bid expectations.

The upshot could be an end to the four-year bull market. Larry Jones, chief investment officer of NED Group, a fund of funds, said: "If the credit cycle unwinds, you are going to see a flight away from risky assets, and that includes equities, so investors could end up giving back some of the very nice profits they've made over the last four years. This is the end of the easy money."

The Chapter 15 Bankruptcy filings by Bear Stearns Structured Credit Strategies and High-Grade Structured Credit Strategies Enhanced Leverage were not unexpected.

Despite the panic selling, some remain confident that the underlying fundamentals for the economy remain strong. A fund manager said: "The system is clogged up. Some banks will be stuck holding debt for longer than they would like, but it will be cleared up in a couple months."

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Figures released by the Insolvency Service today show a 4.2 per cent decrease in the number of liquidations in England and Wales in the second quarter of 2007 compared to the same period last year. There were 3,032 insolvencies, a decrease of 2.1 per cent on the previous quarter.

This was made up of 1,349 compulsory liquidations, a decrease of 2.4% on the previous quarter and an increase of 12.4% on the corresponding quarter of the previous year, and 1,682 creditors voluntary liquidations, a decrease of 1.9% on the previous quarter and a decrease of 14.4% on the corresponding quarter of the previous year.

0.6% of active companies went into liquidation in the twelve months ended Q2 2007, the same as the previous quarter and down from 0.7% in the corresponding quarter of 2006.

There were 26,956 individual insolvencies in England and Wales in the second quarter of 2007 on a seasonally adjusted basis. This was a decrease of 8.1% on the previous quarter and an increase of 4.2% on the same period a year ago.

This was made up of 16,258 bankruptcies, a decrease of 2.9% on the previous quarter and an increase of 7.7% on the corresponding quarter of the previous year, and 10,698 Individual Voluntary Arrangements (IVAs), a decrease of 15.1% on the previous quarter and a decrease of 0.7% on the corresponding quarter of the previous year.

The Insolvency Service's new chief executive is to be Stephen Speed, Secretary of State for Business, Enterprise & Regulatory Reform John Hutton announced on Thursday. The appointment follows a cross-Whitehall trawl of Civil Service senior management.

Outgoing chief executive Desmond Flynn is to retire at the end of September, after more than thirty years with the Service.

John Hutton said: "I congratulate Stephen Speed on his appointment. He will lead the Insolvency Service as it continues its important work helping promote trust and confidence in the market place."

Stephen Speed said: "The Insolvency Service is a key part of the country's financial and economic infrastructure and I am delighted to be taking up this exciting appointment in the autumn. The Service's excellent reputation is built on the high calibre of its staff, based in all parts of the country and providing a wide range of services to individuals and businesses. I am looking forward to building on that excellent base."

Stephen Speed, who is currently the Head of Regions at the Department for Business, Enterprise and Regulatory Reform (BERR, formerly DTI) is expected to take up his new appointment in October.


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R3 – The Association of Business Recovery Professionals, welcomes the research published by the Government today examining the effectiveness of debt advice.

Patricia Godfrey, president of R3, said: "This report underlines what R3 has been saying about getting professional advice early. It shows that levels of debt fall significantly following specialist intervention and that it becomes easier to pay back debts owed. "

Despite the positive evidence of getting professional help that is highlighted by this report, R3 remains concerned that the message isn’t yet getting to enough people. In a recent survey on indebtedness, R3 asked those whose debt was causing them difficulties of was out of control how many of them were getting professional advice. Nearly two thirds of those surveyed were getting no advice at all. They were managing their debt by:

* selling personal items (28%)
* consolidating loans (19%)
* taking out an (additional) credit card (12%)
* taking out an (additional) loan (12%).

Patricia Godfrey added, “R3 members deal with people struggling with debt and see the misery this causes the debtor and their families. Early professional guidance can prevent many of these problems, and allow debtors to manage their debts more effectively, with less of an overwhelming effect on their life and well being.”

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Official statistics are expected to show an increase in the number of people becoming insolvent in England and Wales.
Figures from April to June are likely to be higher than the record level of 30,075 people who became insolvent in the first three months of the year.

Experts say rising interest rates have put people under even more pressure.

Separate data is also expected to show a rise in the number of homeowners having their houses repossessed.

New record

The numbers of insolvencies and repossessions have been rising sharply but the rate of increase is starting to slow.

A huge increase in individual voluntary arrangements or IVAs, a type of insolvency, has boosted the figures but it is thought these are starting to level off as lenders become more reluctant to accept them.

HOW TO GO INSOLVENT
Bankruptcy: the traditional way of escaping overwhelming debt. Ends after one year, but you are likely to lose all your assets including your house to pay something to the creditors
IVA: A deal between you and your creditors, overseen by an insolvency practitioner. Less stigma, less chance of losing your home, but involves paying some of your debts in one go or over a number of years


Q&A: Personal insolvencies

The insolvency figure for January to March 2007 set a new record and was an increase of 23.9% on the same three-month period in 2006.

Although the number of mortgage repossession orders in England and Wales fell slightly between the last quarter of 2006 and first three months of 2007, the last set of figures were up 65% over the year.

But experts say this is still nowhere near the peak of the early 1990s.

Meanwhile, although homeowners were spared another increase on 5.75% on Thursday, UK interest rates have risen five times in the past year as the Bank of England tries to rein in inflation.

One research company CACI says the repossession problem could get worse as nearly 300,000 people will see their cheap fixed rate mortgages run out by the end of the year.

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We reveal how more than eight million Britons are in serious debt
More than eight million Britons are in serious debt, a quarter of whom regularly struggle to meet their monthly repayments, research showed today.

Around 18% of adults have amassed more than £10,000 in unsecured debt, such as on credit cards, store cards and loans, according to debt consultancy Thomas Charles.

The figure was up from the 14% of people who owed more than £10,000 in April and the 13% of people who had amassed debts of this level 12 months ago.

The research found that....

One in 10 Britons now owes between £10,000 and £20,000
3% owe between £20,000 and £30,000
5% of people have amasse debts of more than £30,000.
Among those who owe at least five figures, 25% admitted that they frequently struggled to be able to meet their monthly repayments.
Men tend to owe more than women, with 13% of men owing more than £15,000, compared with 11% of women.
But despite this, women are more likely to struggle with repayments at 27% compared with 24% of men.

James Falla, director of Thomas Charles, said: "Over the past year, we have seen a sharp increase in the number of people who have taken on unsecured debt and are now struggling with repayments.

"These high levels of unsecured debt are clearly linked to the rise in interest rates over the last 12 months. A record rise in house prices, especially in London and the South East, has led to a growing discrepancy between mortgage payments and salaries.

"The high pressure to maintain social and commercial status, particularly experienced by women, often goes hand in hand with high expenditure on the high street."

Warning

But he warned that borrowers affected by the higher interest rates now were storing up debt problems for the future, and instead of reducing their expenditure, they were taking on further unsecured loans and credit card debt.

People living in Scotland are most likely to have debts of more than £10,000 at 19%, while those in the North are least likely to at 16%.

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LONDON, July 31 (Reuters) - More British companies are expected to file for administration in the coming months amid high debt levels and rising interest rates, accountancy firm Deloitte & Touche said on Tuesday.

Sectors such as food processing are particularly vulnerable as they have been squeezed by rising costs of raw materials and on their profit margins, Deloitte said in a report.

Highly indebted businesses in the property and construction industries may also suffer soon as interest rate rises put a squeeze on growth in property values.

"We will see an acceleration in the rate of companies going into administration as more marginal investments begin to buckle," Deloitte said.



"The banks are getting more nervous about lending money with interest rate rises beginning to bite. We have seen a marked increase in the rate of business reviews we are being asked to undertake."

Buoyant credit markets and ample liquidity has kept insolvency levels at historic lows in Europe in the United States over the past two years.

During the first six months of 2007, as many as 1,205 British companies filed for administration, down 15 percent from the same period last year, Deloitte said.

"We should not be misled by the current figures," the accountancy firm said. "At Deloitte we are seeing more work dealing with troubled companies, which were acquired from earlier failed enterprises and which are now beginning to fail again with increasing momentum."

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The global credit crunch has left a handful of banks holding almost $22bn (£10.7bn) of private equity financing as investor appetite dries up amid increasingly jittery credit markets.


A Chrysler Sebring. The private equity group Cerberus insisted that its buyout of the car giant stayed on track

Two major and closely followed debt sales on both sides of the Atlantic were postponed yesterday - a further blow to investor confidence that threatens to put the brakes on the long-running mergers and acquisition boom.

Bankers to private equity firm KKR struggled to sell on debt that was used to finance the purchase of Alliance Boots, the first leveraged buyout of a FTSE100 company. Meanwhile, in the US, JP Morgan was left holding $12bn of debt after failing to offload loans that had been used to finance Cerberus Capital Management's acquisition of Chrysler, the loss-making American car giant.

Both deals join a growing list of at least 35 refinancings that have been postponed or restructured in recent weeks.

The International Monetary Fund warned yesterday that "risks have increased and credit markets could remain volatile in the period ahead with a further repricing of some credit products".

It said that it did not yet fear a major "credit crunch" was likely, with the risk contained to certain parts of the markets. However, it added that the problems in the troubled US sub-prime mortgage market looked to be worsening.

The eight banks holding the Alliance Boots debt, including Deutsche Bank and JP Morgan, managed to sell £1.75bn of it. But they were forced to sell the debt at a 4pc-5pc discount, reducing the fees they collected on the deal. The new owners of Alliance Boots - KKR and billionaire Stefano Pessina - will pay between 0.25pc and 0.5pc more interest on the debt, which will cost them an additional £2.5m in interest payments a year.

However, the banks were forced to postpone the sale of a further £5bn of Alliance Boots debt. "We will come back when market conditions are a bit more stable," said an executive at one bank.

Private equity group Cerberus insisted that its buyout of Chrysler remained on track, despite having to postpone the sale of $12bn in debt needed to finance the deal.

Cerberus was seeking $20bn in loans - with $12bn earmarked for Chrysler's carmaking operations and a further $8bn to fund its finance businesses once it is separated from Daimler, which is transferring the company to Cerberus debt-free.

The underwriting banks - led by JP Morgan with Bear Stearns, Goldman Sachs, Citigroup and Morgan Stanley -have been marketing the loans to institutional investors since late June, but recent turmoil in the credit markets has left investors with scant appetite for the loans.

Abandoning the planned sale means banks will now keep the $10bn of loans for the auto unit on their balance sheets until a later date. Daimler and Cerberus itself will buy the remaining $2bn.

Figures suggest June was the worst month in two years for junk bonds and risky corporate loans, and prices have continued sliding for much of July as investors have become more risk-averse.


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The increasingly shaky state of householders' finances will be laid bare next week as Britain's top five banks report huge increases in bad debts.

City analysts expect them to declare that they have set aside a pot of £6.6 billion to deal with customers who can not pay loans and mortgages.

At the same time, official statistics from the Department of Justice are expected to show a jump in the number of houses being repossessed, with submissions to take back homes jumping from 78,000 in 2004 to 132,000 in 2006.

Insolvencies could also hit a record next week when the quarterly figures are released. In the first three months of the year 300 people a day were declared bankrupt or entered insolvency arrangements.

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The number of bankrupts in Britain has soared, with 20,000 people filing for bankruptcy between April and June alone, say insolvency experts.

The figure, expected to be confirmed in new Government statistics this week, is 10 per cent up on the total of 18,000 for the first three months of the year.

Rising taxes and interest rates are blamed for the increase. Mark Sands, the head of personal insolvency at the auditor KPMG, said: "At a time when wages are rising relatively modestly, families have faced five interest rate rises in a year, and huge increases in utility bills and council tax. The level of financial distress is alarming, and we are seeing more and more people crying out for help."

the Sunday Telegraph can also reveal that more than 420,000 were prosecuted for defaulting on loan repayments in the first half of the year - an 8 per cent rise on the same period in 2006.

Next week, the top five banks are also expected to report a £6.6 billion increase in bad debt.

With interest rates predicted to break through the 6 per cent barrier next month, MPs and experts united to condemn the Government for failing to deal with soaring levels of debt.

Vince Cable, the Liberal Democrat deputy leader, said: "This Government has consistently overlooked what is for many a very serious and deteriorating problem."

The Citizens Advice Bureau dealt with more than 1.4 million new cases of debt last year, up 11 per cent on 2005. It said debt enquiries had risen "remorselessly" and lenders were not making the checks needed to ensure that people could afford to take on more credit.

Neville Kahn, an insolvency partner at Deloitte, said: "The vast array of lenders means it is far too easy for people to overstretch themselves.

"But in the second half of the year, I expect it will become more difficult for people to spend their way out of trouble."

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LONDON (Reuters) - Alliance Boots has postponed syndication of the 5.05 billion pounds of senior debt backing its leveraged buyout, Europe's largest ever, a source familiar with the situation told Reuters Loan Pricing Corp. (RLPC) on Wednesday.

The company, which is being bought by Kohlberg Kravis Roberts & Co and deputy chairman Stefano Pessina for 11.1 billion pounds, is pressing ahead with the syndication of 1.75 billion pounds of second-lien and mezzanine debt at steep discounts, with responses on these tranches due by Friday, the source said.

"Market conditions drove our decision to withdraw the senior (debt) at this time", the source said.

The turbulent European leveraged loan market is experiencing record volatility, which is causing a market-wide repricing as investors reassess risk and return.

The Boots loan is the third and by far the largest European leveraged loan to be postponed due to credit market turmoil. A loan for Dutch DIY retailer Maxeda was pulled in mid-July, and German publisher Springer decided not to proceed with a dividend recapitalisation in light of current market conditions.

Boots's 1 billion pound second-lien loan will be offered at 96 percent of face value with an interest margin of 425 basis points (bps), up 25 basis points from the original level, the source said. The loan cannot be called for two years, as before.

The 750 million pound mezzanine tranche will be offered at 95 percent, with a margin of 650 bps, up 50 basis points from the original level.

The mezzanine margin is split 300 bps in cash and 350 bps payment in kind, the source said. The loan cannot be called for three years, as before.

ARRANGERS HOLD SENIOR DEBT

The 5.05 billion pounds of senior debt will now be held by the eight banks arranging the loan until market conditions improve.

The loan is being led by global co-ordinators Deutsche Bank , JP Morgan and UniCredit (HVB) and Barclays Bank , Citigroup , Bank of America , Merrill Lynch , and Royal Bank of Scotland .

"The senior debt has been withdrawn until some future date. The underwriters will hold the senior debt for now. We are very comfortable with it," the source said.

"We will revisit it at the right time. Who knows when that will be," the source said.

The arranging banks had presented a range of options to Boots investors earlier this week, with similar margins but a smaller discount, banking sources said. The margin increases are paid for by sponsor KKR, while the arranging banks finance the discount.

The senior debt was previously offered with a margin of 300 basis points and a discount of 99. The second lien was offered at 425 bps and a 98.50 discount, and the mezzanine was offered at 650 bps and a 98 discount, banking sources said.

The arrangers said the mezzanine tranche was now more or less complete and the second lien had a substantial order book.

"We have a strong bid for the junior tranches and wanted to bifurcate the distribution," the source said.

The current crop of bull market loans that are now under revision on both sides of the Atlantic after encountering market turbulence are littering arranging banks' balance sheets as liquidity ebbs from the loan market.

This is creating exposure issues and losses for banks that mark positions to market, and may affect banks' ability to underwrite new business in the short term, banking sources said.


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The City is bracing itself for more bad news on bad debts from HSBC when it announces its half-year results tomorrow, amid fears that the crisis in sub-prime lending in the US has spread to other parts of its loan portfolio.
Antony Broadbent, banking analyst at Sanford Bernstein, expects the bank to warn that there has been an increase in bad debts in its unsecured lending book. He is forecasting provisions against its US personal financial services business of $3.3bn (£1.6bn) in the first half of the year. While that is lower than the $4.6bn charge in the second half of 2006, that figure included a $1.8bn exceptional write-off against sub-prime loans to borrowers with poor credit records. Excluding that, his forecast implies a 17 per cent increase in provisions for the division.

This comes as other banks are reporting lower bad debt charges. Barclays said in a statement accompanying its new offer for Dutch bank ABN Amro last week that its impairment charges had fallen by 9 per cent to just under £1bn and chief executive John Varley indicated last week that it would have met its targets for cutting bad debts on its Barclaycard credit card business.
Analysts are looking for signs that the wholesale banking businesses of Barclays and Royal Bank of Scotland in particular have been affected by the turmoil in the financial markets last week. Barclays said that its BarCap increased profits by 34 per cent in the first half of the year and Varley indicated that the looming credit crunch had had no impact.

· The chief executive of the British Bankers' Association, Angela Knight, has claimed that a legal case could spell the end of free banking in the UK. The Office of Fair Trading and eight high-street banks went to court on Friday, in an effort to end the uncertainty surrounding what consumer groups have been describing as illegal, excessive bank charges on those who exceed their overdraft limits.

'Let's suppose that a judge comes to a conclusion and restricts dramatically every fee and charge. That is the time at which the current fee structure would have to change,' she said.


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Taipei (Dpa) - Taiwan's electronics giant BenQ Corp Wednesday rejected lawsuits by the insolvency administrator of BenQ Mobile seeking million-dollar payments BenQ allegedly owes BenQ Mobile.

'BenQ was informed that Martin Prager, the insolvency administrator of BenQ Mobile, has filed two lawsuits against BenQ in a Munich court, claiming payments of about 1.2 million euros (1.5 million US dollars) and about 68.9 million euros (89.5 million US dollars) respectively, BenQ said in a statement.

'The lawsuits arose from certain account payables made by BenQ Mobile to BenQ in 2006. BenQ believes the payments were paid as ordinary payments for goods sold. BenQ is questioning whether BenQ Mobile has a legal basis to make the claim and has retained legal counsel to handle the litigations. It is the preliminary assessment of counsel that the evidence put forward by Mr Prager to support the lawsuits appears to be relatively weak,' it said.

'BenQ reserves the right to hold the IA of BenQ Mobile accountable for any action taken or statement made without legal basis which damages the goodwill and interests of BenQ,' it said.

The statement said that the spin-off of BenQ's branding business from its OEM business was proceeding smoothly, and the litigation would not have an impact on BenQ's finances.

BenQ made international headlines when it bought the loss-making cellphone unit of Siemens in 2005 to form BenQ Mobile to design the Siemens-Ben line of cell phones. Siemens allowed BenQ to use its brand to make cellphones for five years.

But in September 2006, BenQ stopped investing in BenQ Mobile, citing losses of 840 million euros (1.1 billion US dollars) on delays in new models, causing BenQ Mobile to file for bankruptcy and throwing its 3,000 staff out of work.

On March 21, 2007, 4,350 creditors of Benq Mobile met in Munich to prepare to claim 1.2 billion euros (1.6 billion dollars) in compensation from BenQ. Creditors include BenQ Mobile employees and Brazilian soccer star Ronaldo, who appeared in a 2005 TV commercial promoting BenQ Mobile.

BenQ denied that it had any responsibility to the overseas creditors.

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The credit crunch sweeping the international markets claimed its latest victim as Cadbury Schweppes delayed the £7 billion-plus sale of its US drinks arm just days before it was due to enter the final stages.

The maker of Dr Pepper and Snapple drinks described the leveraged debt markets as suffering "extreme volatility in recent days" as its extended the timetable for the deal.

Final bids were originally due next week, according to sources, who said Cadbury's would now wait until market conditions had settled sufficiently to enable the buyers to raise debt funding to back their purchase.

"It's the volatility of it; it's hard for them to pin the financing down, it puts them in a crunch situation," one source said.

To all intents and purposes, the debt markets have shut down this week, with bankers and fund managers worried about the risk of suffering losses as the crisis in sub-prime mortgages spreads to the wider credit markets. One hedge fund manager this week said the market "sensed there is blood in the water".

"A decision has been taken to extend the sale timetable to allow bidders to complete their proposals against a more stable debt financing market," Cadbury's said.

Sources said Cadbury's was not under timing pressure to complete the sale, first unveiled in mid-March.

First-round bids for the high-profile sale were submitted in mid-June, with around a dozen potential buyers moving forward into the second round.

Now, just two consortia remain in the process, although Cadbury said interest was still "strong" and suggested there was still a chance more buyers might emerge.

Bain Capital Partners, Thomas H Lee Partners and Texas Pacific Group are members of one consortium, while Blackstone, Kohlberg Kravis Roberts and Lion Capital make up the second.

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Responding to claims from Northern Rock that their recent surge in bad debts is a consequence of debtors being put into unsuitable IVAs, Nick O’Reilly, Vice President of R3- The Association of Business Recovery Professionals- said:

‘I find it staggering that Northern Rock are seeking to lay the blame for their poor lending decisions at the door of IVA providers. Insolvency Practitioners don’t lend the money and they don’t spend it. They offer a solution to help people sort out their debt problems.

Insolvency Practitioners who oversee IVAs are highly regulated professionals who do not, as a matter or course, recommend solutions to debtors which would be unsuitable. I will be writing to Northern Rock asking for evidence of their claims that 9 out of 10 people have been recommended IVAs that are not in their interests’

An IVA (Individual Voluntary Agreement) is a statutory measure which allows debtors to put a proposal to their creditors for final satisfaction of their debts. IVAs require creditors to freeze the interest on debt, stop harassment from creditors and their agents and unusually mean that debtors can keep their homes.

Nick continued:

“What is most worrying, from R3’s perspective, is that blanket refusals of IVAs will mean that more people are forced into bankruptcy- and that means the loss of the family home for debtors or debt management plans which don’t freeze interest and can last for years longer than an IVA. Forcing debtors to choose between a roof over their head or a lifetime of slaving to pay back debt is deeply unfair”

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Underlying conditions in the consumer debt market continue to move in favour of Invocas, the Aim-listed firm told shareholders yesterday.

Shares in Invocas rose 9p to 127.5p after chairman Howard Bell said the recent industry agreement to reduce fees for individual voluntary arrangements (IVAs) for debtors in England and Wales did not impact directly on Invocas, the market leader in Protected Trust Deeds North of the border.

However, he went on: "This all points towards the need to work with lenders to develop high quality, long-term, sustainable insolvency solutions which deliver good returns to creditors in a sensible time frame.

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"Our chosen market positioning and existing business model already puts us in a good position to benefit from changes in the dynamics of our sector.

Invocas already works in partnership with banks in the Insolvency Exchange, which is negotiating the IVA fees.

Bell added: "We are actively pursuing our strategy of broadening the range of our services by the acquisition of complementary businesses and by the in-house development of additional debt solution services."

He said referrals from new affinity partners and business from the group's new call centre and website were delivering increasing numbers of leads and steady revenue opportunities.

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One in six people in Britain claim that their debts are causing them difficulties, according to R3 – The Association of Business Recovery Professionals, who represent 97% of the country’s Insolvency Practitioners. Of those surveyed with the worst debt problems, 21% say illness is a factor, and 33% highlight redundancy. Over half of 18 – 24 year olds have student debt that they are servicing, and one in three of 25 – 34 year olds are still paying off student debt.

However, many adults simply say that easy access to credit, overspending and a desire to buy cars, take holidays or have what they want when they want it are the factors behind the meteoric rise in Britain’s indebtedness.

These preliminary findings are part of an R3-sponsored survey of British attitudes to debt, carried out by market research experts YouGov. Every quarter, the public will be comprehensively surveyed about the levels of their mortgage and non-mortgage debt. Their attitudes to debt will be recorded across the population as a whole and comparisons made against age, earning power, gender and social grade. Each quarter a debt index will be produced which will show the level of mortgage and non-mortgage debt against average gross personal income.

Commenting on the R3 debt index, the President of R3, insolvency lawyer Patricia Godfrey said: “ Our members see the misery that high levels of debt can cause, as it is our Insolvency Practitioners who pick up the pieces when the debt become unbearable. What we will be producing here is a barometer of the increasing indebtedness across Britain. It will provide us with an important insight into the underlying causes of the burden of debt, and changing attitudes towards it.”

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The administrators sifting through the debris following Metronet Rail's spectacular plunge into insolvency last week moved quickly to reassure staff and suppliers that it would be business as usual while it sought to transfer the companies activities to another operating company.

Existing contracts
Speculation is rife as to who that new operator will be. Transport for London (TfL) has a number of choices. One option is for TfL to take over the management of Metronet's existing PPP contracts with Trans4M, a joint venture of Metronet shareholders Atkins, Balfour Beatty, Bombardier, EDF Energy, and Thames Water. Certainly Atkins and Balfour Beatty seem amenable to this solution.

An Atkins spokeswoman said: "The administrator could decide that although the contract was wrong, the people were right. However, whether that happens will depend on the administrator. Certainly in the short term the contracts will have to remain in place. We want to ensure as orderly a handover as possible and, if work were to stop, it could end in chaos."

Balfour Beatty echoed this view. "Certainly in terms of our track replacement programme, whatever the new ownership structure, it would be a brave decision to decide to take Balfour out of the equation, considering we have all the staff, equipment and know-how there already."

However, he added that Balfour's appetite to remain on the stations upgrade programme, which had been at the heart of Metronet's claims for £2bn cost overruns, "was not high".

If Balfour Beatty is replaced, as seems likely, on the PPP stations upgrade programme, there will be no shortage of contenders for the work. In pole position are the four contractors - Cleshar Contract Services, Costain, Taylor Woodrow and YJL Infrastructure - that Metronet recently took onboard to help speed up its delayed stations upgrade programme. A source at one of the four firms said: "We would be more than capable of widening our remit on the stations upgrade programme."

However, Mayor of London Ken Livingstone suggested that station upgrades may have to be delayed in favour of track and signalling work.

Alternatives
Some of Metronet's workload could also be transferred to TfL's Alternative Provider framework. Set up last year, the framework consists of Taylor Woodrow Construction, Birse Metro and Morgan Est (formerly Gleeson MCL). Its brief was to cover upgrade work outside of the PPP contracts and to provide a way of benchmarking the PPP infracos' work. The framework was so successful that TfL last month announced plans for another nine supplier frameworks, ostensibly to cover its £2.8bn capital works programme. Some observers say there was always a wider agenda. One said: "The timetable for these supplier frameworks picked up this year. The view is these are all part of TfL's contingency plans, which it put together this year when it realized how bad things were at Metronet."

Another format TfL could adopt is the type of partnership it has with Hong Kong firm MTR and Laing, which recently took over the operation of the North London railway, now rebadged the London Overground. The deal includes the £1bn rebuilding of the East London Tube Line. Unlike the PPP contracts, TfL retains much greater control over the contract.

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There has been much discussion as to the scope of the decision of the House of Lords in Melville Dundas v Wimpey and how it will come to be applied by lower courts. Guidance has now been given by the decision of the TCC in Pierce Design v Johnston.

There were similarities and differences between Melville Dundas and Pierce Design.

Both concerned JCT 1998 wording.
In both cases the employer sought to rely on a contractual right to suspend payment following the determination of the contractor’s employment. The relevant wording of the suspensive clauses under both contracts was the same.
However, the contractor’s employment in Melville Dundas was determined owing to its insolvency. In contrast, in Pierce Design the basis for termination was contractor default.
In Pierce Design a number of the contractor’s interim payment applications had been short paid for a considerable period, seemingly because the employer was not satisfied with the contractor’s performance. Yet withholding notices were not issued by the employer.

Decision

HHJ Coulson QC applied Melville Dundas v Wimpey and held that the provision of the JCT 1998 form (clause 27.6.5.1) which permitted the suspension of payment in the event of the contractor’s employment being determined for default was not inconsistent with the Construction Act. The judge pointed out that the House of Lords had upheld the very clause that was in dispute. The fact that the contractor’s employment had been determined for default, not insolvency, was not a basis for holding the clause to be inconsistent with section 111 of the Construction Act.

As a twist, HHJ Coulson QC held, however, that the clause in question did not permit payment to be suspended for certain amounts which the employer had "unreasonably not paid". On the facts of this case, the employer had short-paid the contractor on a number of occasions more than 28 days before determination, without issuing withholding notices where they could and ought to have been issued. This conduct was unreasonable, so the employer could not rely on the clause to suspend payment of amounts that fell due a long time ago. The fact that the employer claimed it had an overtopping counterclaim at the date of trial made no difference.

Comment

Some commentators have suggested that Melville Dundas v Wimpey would only apply in cases where a contractor’s employment had been determined for insolvency, so that amounts that were due before insolvency would no longer be due. Pierce Design indicates that the position is broader, and that provisions entitling an employer to suspend payment upon contract determination are not invalid where the basis for determination is contractor default.

What remains to be seen is whether Melville Dundas v Wimpey applies in circumstances where a construction contract has not been determined, i.e. a project is still "live" as between employer and contractor, and valid withholding notices have not been issued.

Reference: Pierce Design International Ltd v Johnston [2007] EWHC 1691 (TCC)http://www.bailii.org/ew/cases/EWHC/TCC/2007/1691.html Interested in adjudication and construction issues? Take a look at our online facilities dedicated to adjudication cases and construction issues.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.


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In non-legal contexts, a judgment is a balanced weighing up of evidence preparatory to making a decision. A formal process of evaluation applies. A judgment may be expressed as a statement, e.g. S1: 'A is B' and is usually the outcome of an evaluation of alternatives. The formal process of evaluation can sometimes be described as a set of conditions and criteria that must be satisfied in order for a judgment to be made. What follows is a suggestive list of some conditions that are commonly required:

there must be corroborating evidence for S1,
there must be no true contradicting statements,
if there are contradicting statements, these must be outweighed by the corroborating evidence for S1, or
contradicting statements must themselves have no corroborating evidence
S1 must also corroborate and be corroborated by the system of statements which are accepted as true.
One should be cautious in attributing, without a rigorous analysis, a rigid set of criteria to all forms of judgment. Often this results in unnecessary restrictions to judgment methodologies, excluding what may otherwise be considered legitimate judgments. For analogous difficulties in science and the scientific method see the Wikipedia entry on the scientific method.

From the criteria mentioned above, we could judge that "It is raining" if there are raindrops hitting the window, if people outside are using umbrellas, and if there are clouds in the sky. Someone who says that despite all this, it is not raining, but cannot provide evidence for this, would not undermine our judgment.

However, if they demonstrated that there was a sophisticated projection and audio system to produce the illusion of our evidence, then we would probably reconsider our judgment. However, we would not do this lightly, we would demand evidence of the existence of such a system. Then it would need to be decided again upon available new evidence whether or not it was raining.

Many forms of judgment, including the above example, require that they be supported by, and support, known facts which are themselves well supported, and its negation must be shown to be unfounded, before it is accepted as well founded.


Legal use
In the United States, under the rules of civil procedure governing practice in federal courts and most state courts, the entry of judgment is the final order entered by the court in the case, leaving no further action to be taken by the court with respect to the issues contested by the parties to the lawsuit. With certain exceptions, only a final judgment is subject to appeal.


Types of judgment in law
Consent judgment, a final, binding judgment in a case in which both parties agree, by stipulation, to a particular outcome
Declaratory judgment, a judgment of a court in a civil case which declares the rights, duties, or obligations of each party in a dispute
Default judgment, a binding judgment in favor of the plaintiff when the defendant has not responded to a summons
Summary judgment, a legal term which means that a court has made a determination without a full trial
Vacated judgment, the result of the judgment of an appellate court which overturns, reverses, or sets aside the judgment of a lower court
Value judgment, a judgment of the rightness or wrongness of something

Spelling
The spelling judgment is found in the Authorized Version of the Bible. However, the spelling judgement (with e added) largely replaced judgment in the United Kingdom in a non-legal context, possibly because writing dg without a following e for the /dʒ/ was seen as an incorrect spelling. In the context of the law, however, judgment is preferred. In the U.S. judgment strongly prevails. As with many such spelling differences, both forms are equally acceptable in Canada and Australia, although judgment is more common in Canada and judgement in Australia.[1] In New Zealand the form judgment is the preferred spelling in dictionaries, newspapers and legislation, although the variant judgement can also be found in all three categories. In South Africa, judgement is the more common form. See further at American and British English spelling differences.


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Britian is headed for financial meltdown with the number of couples declaring themselves insolvent set to triple between now and 2010, new research has claimed.

Around 13,000 couples in England and Wales applied for insolvency in 2006, 165% more than in 2004.

But the figure could rise even further to 50,000 by 2010, according to a report by the Manchester Business School for accountancy firm Haines Watts IVA.

At the same time, the level of debt built up by couples who have declared themselves bankrupt or taken out an individual voluntary arrangement (IVA) has more than doubled - from £21,000 in 2004 to over £42,000 last year.

Dr Sydney Howell, at Manchester Business School, said: "Some of these couples, especially those in their early 30s, are facing a future with no pension, no savings and huge debts.

"Rising house prices and interest rates, ever-increasing living costs and wages that have not kept up with inflation have all produced crippling debts and left more and more people turning either to bankruptcy or insolvency as their only way out."

Gill Wrigley, insolvency practitioner for Haines Watts, said the group had seen an increasing number of couples applying for IVAs, particularly during the past 12 months.

She said couples accounted for just 10% of the group's clients in 2002, but the figure had now grown to 40% and showed no sign of reducing.

She said: "Young couples, typically those turning 30 are vulnerable because they are in a transitional life-stage where they are settling down, buying a house and wanting to start a family, but still also spending a high proportion of their income on social activities."


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LONDON (Reuters) - Major high street banks will settle for a 20 percent cut in fees for individual voluntary arrangements (IVA), says the firm representing them, to end a dispute with the companies that charge them for setting them up.

IVAs are alternatives to bankruptcy for consumers who owe banks a large amount of money -- often as much as 50,000 pounds. Consumers agree to pay back a portion of the debt over five years, with the rest written off, while IVA firms charge banks for setting up and administering the complex arrangements.

"The average amount that fees will come down by is around 20 percent," said Mark Onyett, chief executive of TDX Group, which runs the Insolvency Exchange.

The Insolvency Exchange represents major banks including HBOS , HSBC and Royal Bank of Scotland and decides whether to approve IVAs on their behalf.

"It's important to point out these proposals haven't been agreed by the IVA industry yet but if this is what the banks want we would be quite thrilled," said Michael Shirley, Operations Director at IVA firm Debtmatters .

"People had been saying they wanted to knock off 40 percent from the IVA fees... it appears a compromise has been reached."

The average fee will come down to around 5,200 pounds, before VAT, from 6,600 pounds, Onyett said.

The news was welcomed by investors who had feared the fees could be slashed even further.

IVA firms whose shares had been hit hard in recent months, partly because of worries over fees, saw an immediate uplift. Shares in Accuma rose 38 percent, Debtmatters 11 percent and largest industry player Debt Free Direct by 7 percent.

"I think people had been worried things could be worse," said Onyett.

The Mail on Sunday had previously reported in May the fees were to be capped at 4,500 pounds, which sent shares in IVA firms down by as much as 10 percent.

The proposals for fees and IVA structure will mean a decrease in the number of IVAs rejected by the Insolvency Exchange, possibly by half, according to Onyett. The Insolvency Exchange decides whether to approve around 60 to 70 percent of the IVAs proposed by the industry in total.

The new criteria are expected to bring an end to the feud between banks and IVA firms which has seen banks reject up to 20 percent of proposed IVA schemes in the last eight months.

"Under the new arrangement there's a shift away from a large upfront fee and a fixed supervisory fee to a smaller upfront fee and a performance-based fee on the back end," said Onyett.

IVA firms will get paid depending on the amount of debt they get back from consumers rather than a set "supervisory" fee for administering an IVA.

The IVA firms will have to distribute collected money to creditors within six months and on a monthly basis thereafter, whereas previously the payments were annual and the first often did not happen until the third year, according to the Insolvency Exchange.

IVA firms have also been working with the British Bankers' Association and an ad hoc forum called the Debt Resolution Forum on a consensus to stop disputes over IVA fees and structure.




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Yesterday the Insolvency Exchange (TIX) proudly announced and boasted the rollout of a "major package of changes to the acceptance criteria for Individual Voluntary Arrangements." While you have to applaud the TIX group for not being bashful about coming forward, you've got to wonder how they can be so proud about changes that do nothing to fix the real problem of consumers getting screwed in IVA reforms which only benefit creditors.

I don't think it is an unreasonable expectation that as a society we shoot for fairness and balance as the target in resolving problems. But I would be dumbstruck if someone would be able to come forward to say that the recently announced IVA reforms benefit consumers in the least.

The current trouble with the IVA marketplace is that creditors are not properly considering fair, reasonable and sustainable binding repayment proposals from consumers in financial trouble. Many creditors in the UK today would rather inflict pain and agony into the lives of consumers struggling enormous financial pressure, by rejecting their IVA repayment proposals, than extend a helpful hand to resolve the problem.

The situation today is so bad that it is almost as if the creditors are putting a boot to the face of the consumer sinking into debt quicksand while at the same time holding a placard that reads "I'm Here to Help."

The Insolvency Exchange press release goes on to say that "the changes will benefit all parties associated with an IVA", but does it really? While it might give you a warm fuzzy feeling to think that these changes make the world a safer and happier place to live, they don't, at least for consumers.

These recently announced changes are all designed to benefit one party, not all as proclaimed. And in case you haven't received your invitation in the post, the party is at the creditor's house.

Forcing insolvency practitioners (IPs) to adopt new and expensive processes and procedures to provide "operational efficiencies" only serves the creditors in their desire to ram fee reductions down the throat of IPs.

You see what the Insolvency Exchange release fails to mention is that creditors are treating UK consumers with contempt and disgust when it comes to allowing people to repay their debt is a fair, reasonable and sustainable way. Operational efficiencies are great for reducing processing costs but that's not where the problems in the IVA marketplace today, unless you are a creditor.

The elephant in the room that nobody can see is the fact that creditors are arbitrarily rejecting fair repayment proposals from consumers, even though the person is making their best effort to repay, simply because the creditor created a line in the sand of requiring at least a certain rate of return that make the creditor gleeful. And if that can't be done, the repayment proposal is rejected and the consumer is told to tuck their tail between their legs and go away.

Creditors are boasting that these ridiculous and grossly unfair policies are working because they can't see a large increase in people going bankrupt after their IVA repayment proposal is rejected. I can only assume that creditors feel that they've batted away the consumer from entering a fair and binding repayment arrangement, only to toss them back into the mass of consumers financially limping along towards the quagmire of debt.

In an ongoing survey about IVAs that is being conducted at http://iva.questionpro.com , people are responding that they would seek other options if their IVA proposal was rejected. When asked "If you propose an IVA to repay your debt and your creditors do not accept your proposal, which of the following options would you consider to resolve your financial problems?" Respondents gave the following responses: Borrow money from a friend or family member - 0%, Enter an informal debt management plan. - 35.71%, Bankruptcy - 42.86%, or Do nothing for now and evaluate my options latter. - 21.43%.

The current crisis in IVAs is not if processors or IPs have "operational efficiencies" but that consumers are not being treated fairly according to codes established by the Financial Services Authority, or the Banking Code proudly promoted by the British Bankers Association.


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The number of individual insolvencies looks set to triple between now and 2010, as rising interest rates start to bite, research claimed yesterday.

Around 13,000 couples in England and Wales applied for insolvency in 2006, 165 per cent more than in 2004.

advertisementBut the figure could rise even further to 50,000 by 2010, according to a report by the Manchester Business School for accountancy firm Haines Watts.

At the same time, the level of debt built up by couples who have declared themselves bankrupt or taken out an individual voluntary arrangement (IVA) has more than doubled - from £21,000 in 2004 to over £42,000 last year.

Dr Sydney Howell, at Manchester Business School, said: “Some of these couples, especially those in their early 30s, are facing a future with no pension, no savings and huge debts.

“Rising house prices and interest rates, ever-increasing living costs and wages that have not kept up with inflation have all produced crippling debts and left more and more people turning either to bankruptcy or insolvency as their only way out.”

Earlier this year, Government figures showed that a record number of 300 people a day were being declared insolvent or bankrupt.

The statistics showed that in the first three months of the year 16,842 people went bankrupt while 13,233 opted for an IVA, which is seen as a softer form of bankruptcy because the debtor is allowed to keep their home.

The figures are expected to have increased last quarter as interest rates push an increasing number of people into financial difficulties.

Gill Wrigley, insolvency practitioner for Haines Watts, said the group had seen an increasing number of couples applying for IVAs, particularly during the past 12 months.

She said couples accounted for just 10 per cent of the group’s clients in 2002, but the figure had now grown to 40 per cent and showed no sign of reducing.

She said: “Young couples, typically those turning 30 are vulnerable because they are in a transitional life-stage where they are settling down, buying a house and wanting to start a family, but still also spending a high proportion of their income on social activities.”

Professor Muir Hunter, an author on debt, said: “The worry is that people are spending all this money on credit cards without building up any solid assets.”


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Ken Bates and his solicitor, Mark Taylor, may have breached insolvency law by acting as directors of Leeds United Football Club Limited, the new company formed to buy the club out of administration, according to HM Revenue and Customs.
The Guardian has learned that one of the grounds for HMRC's challenge to the Company Voluntary Arrangement which originally approved the sale by the administrators, KPMG, to the new company, was that Bates and Taylor did not have permission from a court to be directors. HMRC believed permission is required because both men were previously directors of a different company, also called Leeds United Football Club Limited, which went into liquidation in June 2006.

According to s216 of the Insolvency Act 1986, anybody who has been a director of a company which has gone into liquidation must obtain the court's permission if he wants to be a director of a new company with a similar name within five years. Trading without obtaining that permission is a criminal offence and anyone prosecuted and found guilty of it is, according to the act, liable to a fine or imprisonment.
KPMG has said it believes an application has been made to the court on behalf of Bates and Taylor but the Insolvency Service, which would be invited to respond to any application, said yesterday it had no notice of one, although there could be a delay in being informed by a court.

The question of whether s216 has been satisfied arises from the original company, Leeds United Football Club Limited, of which Bates and Taylor were directors. It changed its name, to Romans Heavies Limited, on December 2 2005, then on June 6 2006 went into liquidation. As Bates and Taylor had both been directors of the company during the 12 months preceding the liquidation, s216 appears to apply, requiring the court's permission for them to be directors of any company with a similar name within five years. HMRC is understood to have argued in its legal challenge to the Leeds United CVA that Taylor and Bates were in breach of s216 because the court's permission had not been granted.

Neither Taylor nor Bates responded to questions about the alleged breach, so it is not known whether they have omitted to make an application or consider that it is not necessary for them to do so.


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