Receiver's office faces personal debt deluge

Alarm that the UK's debt mountain could spiral out of control have gone unheeded as individuals continue to take advantage of low interest rates and easy credit. In the second quarter of 2003, 8,662 people were declared bankrupt, an increase of 14% on the same period last year.

Bankruptcy specialist Louise Brittain of Baker Tilly told Accountancy Age that, when combined with more relaxed bankruptcy legislation, the rise in debt would lead to a huge increase in personal insolvencies. This in turn will swamp the Official Receiver's office - the government department that deals with the majority of cases.

'The courts and the receiver's offices are likely to be inundated. Our government is not putting in extra resources to deal with the inevitable increase in bankruptcy, it is just changing the legislation so it can spend less time on each case,' said Brittain.

But Desmond Flynn, head of the government's insolvency service, the body that controls the Official Receiver's office, denied there was a problem. 'In addition to the changes to personal and corporate insolvency law, the Enterprise Act also contains powers to create a new financial regime for the insolvency service,' he said.

'This will mean the administration of bankruptcies and compulsory liquidations will be fully funded from fees taken from such cases. If there is an increase in case numbers, there will also be an increase in the fee income, which we will use to deploy additional resources to deal with those cases.'

Brittain said she was doubtful, however, and explained that in most bankruptcy cases, there are no assets.

Concerns about rising credit card debts were exacerbated last week by a study by Mintel, which found more than two million Britons could be caught in a trap if interest rates rise and they continue spending beyond their means.