The increase in personal debt as a result of the Covid-19 lockdown is likely to be a key driver behind many bankruptcies between now and Christmas, according to a top insolvency practitioner.
Ian Defty, Partner at insolvency and restructuring firm CVR Global, believes the UK is set to face a deluge of bankruptcies or debt relief orders from individuals who are being made redundant because of Covid-19, but are unable to find alternative work.
He said: “Make no mistake, there will be an unprecedented amount of businesses entering into a formal insolvency route by Christmas and into the New Year, but unlike previous recessions, I think there will be an alarming rise of personal insolvencies.
“Usually when a skilled worker is made redundant, they would at least be able to apply for a job paying the minimum wage to make ends meet – but such is the state of the economy at present that they don’t even have that safety net – and, as such, it is likely to see families struggling to pay mortgages and credit card bills.
“The spotlight on personal debt is going to intensify as we get to the end of October, as that is when the generous furlough scheme ends and more businesses are likely to be finalising or pressing ahead with redundancies if they can’t commit to the Job Support Scheme.
“Credit cards will have been covering the financial cracks for some families during lockdown, but it just isn’t sustainable, and given that the financial demands of Christmas is on the horizon, those with bad levels of debt will want to clear as much as they can beforehand via the bankruptcy route so that the festive season isn’t cancelled altogether.”