The middle classes are at an increased risk of falling into insolvency. Denial, ignorance and false confidence means many people in the UK used to getting what they want could be setting themselves up for a major fall. Insolvency, bankruptcy and repossession rates are all set to rise in 2008. The surge in the sales at the end of 2007 is thought to be masking the real gloom and fears over the pending economic slump.

Insolvency and big spenders

As banks tighten their belts and get stricter on their lending criteria, consumers are still acting as if all is as normal. The Boxing Day sales in 2007 showed consumers were ‘defying fears' of the pending economic slowdown. But is the confidence in their personal finances misplaced? Insolvency could impact on those who previously hadn't considered the consequences of debt. But escalating housing costs and a spiralling economy all add up to an increased risk of insolvency for those traditionally buffered by economic slumps.

Insolvency and affordability

Housing is a central issue – for those homeowners who face increased mortgage payments as their fixed rate contracts end, and those who have already released equity to pay off previous debts, they could be at the sharp end of insolvency. Homeowners can no longer rely on their homes being a nest egg. But insolvency could be a nasty shock for many as a Guardian newspaper poll in December 2007 revealed that 55% of voters felt confident financially despite the ‘economic chills' in the air.

Misplaced consumer confidence

The strong start to the 2007 Christmas sales point in fact to mass denial of a global credit crunch as retailers had a much stronger than expected end to the year. But the reality behind the sales is prices were slashed by a massive 70% as a result of excess stock and fears of a marked downturn in 2008. Insolvency is a growing threat for those who will finally feel the impact of rising mortgages and a 4% rise in food prices. It can take just a matter of months of mortgage arrears and debt to become another insolvency statistic.

At risk from insolvency

Retailers were keen to clear stock before the consumer confidence began to seriously slump. And although many millions grabbed some great bargains, the concern about how to clear credit card bills in January is going to cause some major headaches in 2008. Insolvency rates are a concern for 40% questioned in the Guardian poll who said they were no longer confident about their personal financial situation and their ability to keep up with the cost of living. The poll shows that it's the middle-class voters who are most concerned about an economic slump, perhaps because they have more to lose, and are increasingly at risk from insolvency.

Varden Nuttall has been established for more than 15 years and is dedicated to helping people in financial difficulty find a debt management solution through an individual voluntary arrangement (IVA). We employ 90 people, including trained and skilled individual voluntary arrangement administrators; we are one of the largest individual voluntary arrangement companies in the UK and handle more than three per cent of all individual voluntary arrangement applications. To find out more about the company, or to make an appointment to talk about putting an individual voluntary arrangement in place, call us today on 0800 031 9802 or fill in our online enquiry form.