England

Bank write-offs double for bad credit card debt

Debt blogger

The Bank of England has reported a significant rise in the amount of money that banks have written off as bad debts on their credit cards.

The Bank figures show that the total value of the write-offs doubled to 1.6bn in the third quarter of 2009.

In the first and second quarter, the figure had been around 800m. The total amount of credit card related write-offs totalled 3.2bn during 2008.08.

These unusually high figures are largely due to the recession and are an acknowledgement by the banks that defaulting borrowers will never repay the outstanding debts.

In comparison, the total amount of mortgages written off in 2008 was just 408m, while averaging 260m in each of the first three quarters of 2009.

Banks and other lenders put much larger sums, running into several billions of pounds, aside each year to cover potential losses on credit cards, mortgages, overdrafts, and personal loans.

“There was a one-off write-off of impaired credit card balances by one of the banking groups,” said a spokesman for the British Bankers’ Association.

David Black of the financial consultancy Defaqto, said that over the last four years, banks have been much more careful about who they will lend to.

“HSBC, NatWest and RBS will only offer new credit cards or unsecured loans to their current account customers,” he said.

“Banks also want to sweep bad news into one year’s accounts to make future years look better,” he added.

Try To Stay Away From Bad Debt And Bankruptcy

Debt blogger

Bad debt is an amount, where business suffers loss and that loss is counted as an expense, as the amount can’t be recollect by the owner. If the debtor declares bankruptcy, problems like bad debt arise. Bad debt is also known by money; therefore it is counted in expense. To account for bad debts, there are two types. They are allowance method and direct write off method. In allowance method, there is a rough idea made at the end of the year for the account of bad debt. It is done, so that they can decrease receivable amount. Many companies make bad debt allowance, as all debtors may pay in full. Money which you cant collect is called as debtor. It mainly arises, if the service or product is given on credit. If customers makes delay payment and later refuses to pay, than its understood that its a bad debt. Bankruptcy means the business which is not able to pay debts.

The process of bankruptcy starts as the petition is filed on creditor’s behalf or by the debtor’s. To recover the debt portion, all assets of debtor is evaluated. As the process of bankruptcy completes, debtors get a sigh of relief. Not to do bankruptcy fraud, as it is a crime. Strategic bankruptcy is different from fraud bankruptcy and is not a criminal act, as it can work against filer. Bankruptcy can disclose all the assets of the debtor. If petition is filed for bankruptcy, creditors can decide debtors assets value. In 1874, India came up with individual bankruptcy law, but still couldn’t got law on corporate bankruptcy. In U.K bankruptcy law got changed, where if debtors facing bankruptcy has to give all occupational pensions. The origin of bankruptcy law came up first through England, but is now known more in U.S. Bankruptcy can sometime lead to death, as there is loads of tension on debtor’s head. Always try not to follow in such cases. You can gather more details regarding bad debts and bankruptcy by visiting various web sites and different sites.