Debt woes force more into bankruptcy
Saturday 01 August 2009
The number of people becoming insolvent will reach record levels when official figures are published next Friday. For the first time, the number of personal insolvencies will top 30,000 for a quarter. In fact, there have been 41,870 personal bankruptcies this year – which works out at one person every six minutes. 22,976 people have entered into an individual voluntary agreement (IVA) since the beginning of the year – that's five people every hour.
Insolvencies – made up of bankruptcies, IVAs and debt-relief orders – could top 125,000 for the year, according to insolvency experts Tenon Recovery, which is almost double what they stood at just four years ago. The number of people who saw their financial situation collapse in 2005 was 66,646. The figure had soared to 106,348 by last year and will leap again in 2009, says Carl Jackson, national head of Tenon Recovery.
"The figures for the first quarter of 2009 showed record highs of personal insolvencies, and it is likely this will again be the case when the latest statistics are announced," Jackson says.
When workers are made redundant, there is normally a six- to 12-month time lag between their losing their jobs and falling behind with debt repayments, and eventually going into insolvency. It means even if the economy improves, the number of people being declared insolvent could go on rising for some time to come.
Worryingly, the number of younger people – between 18 and 24 – becoming insolvent has increased by 50 per cent over the past 12 months. "The rise in bankruptcies within younger age groups is particularly concerning and reflects the vulnerability of this generation as a result of their youthful recklessness and lack of education in managing their finances," Jackson says.
Next week's figures from the Government's Insolvency Service will include debt-relief orders (DROs) – a new halfway stage to bankruptcy – for the first time. Some 2,444 people have applied for a DRO since they were introduced in April, which works out at 25 people per day. However, there has been a rise of 25 per cent in the number of people entering into a DRO in the past four weeks compared with the four weeks previous, says Jackson.
"They are proving popular with those struggling with severe burdens and we are likely to see increasing numbers of people making use of these to address their financial issues," he says.
But insolvency can be avoided. Careful budgeting and sensible spending can be the difference between keeping or losing control of finances. There are a number of organisations that can help people who are facing severe financial problems, but a key part to getting help is admitting you have a problem.
But almost half of those in serious debt are too scared to take action because of the social stigma attached to it, according to research published this week by talkaboutdebt.co.uk. People are worried about the reaction of loved ones, which means they don't talk to them about their problems. The longer they delay doing so, the further into trouble they get.
Andrew Redmond, an insolvency expert, says: "It's enormously hard to face up to a debt problem, and sometimes even harder to share that problem with loved ones. Often, people delay dealing with the problem – hoping for a financial windfall which doesn't come. Sharing a debt problem with a trained adviser can be the first step in solving that problem."
According to talkaboutdebt.co.uk's research, the average debt among people experiencing bankruptcy, a debt-management plan or an IVA is £25,115, although about one in 10 has debts higher than £60,000. Nearly a quarter have no idea how long it will take them to pay their debts off.
Women are even more affected by the pressure of serious debt than men, with three-quarters saying they are not sleeping because of the related stress, compared with three out of five men. But taking that first step is easy, and needn't cost a penny. There are many experienced debt experts who will advise you for free – the key is to contact them before you sink into debt that you can't control.
You can get free advice at your local Citizens Advice Bureau, for instance, or from the Consumer Credit Counselling Service on 0800 138 1111 or the National Debtline on 0808 808 4000.
In the black: How to avoid insolvency
Tenon Recovery gives its top tips
* Get a financial healthcheck
Many people get into trouble because of lack of awareness in relation to their finances; there is plenty of advice around and it is worth getting a financial healthcheck to avoid any future difficulties.
Set yourself a sensible amount that you can afford to spend and keep within those limits. Make sure you get bank statements regularly so you know exactly where you are in relation to your budget.
Many people get into trouble by confusing necessities with luxuries. Make a list of your monthly expenditures and work out which you can live without.
* Shop around
There are often cheaper alternatives, even for everyday items. It is worth looking around to get the best deals, as these savings all add up. The internet is a particular good place to look.
* Stick to cash
It's easy to get carried away using a credit card, and a lot of people forget just how much they cost in terms of interest. Sticking with cash means you are more likely to think twice about any purchases; it is also easier to keep track of your outgoings.
Simon Read: Frozen in time - the expat British pensioners who deserve a better deal
Bargain Hunter: From The Outsider to 1984, catch a cut-price classic, read it in the rye
Donald MacInnes: My wasted hours in the retail deserts of Dixons-Carphone
Energy switching app Voltz allows users to switch with just a few taps
Money Insider: Smart alternatives to the pensioner bond
- 1 The truth about 'girl things': Three cheers for Heather Watson's honesty
- 2 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
- 3 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 4 Tennis fan suing Australian Open organisers for 'failing to shade spectators' during Murray match
- 5 Syrian refugee child beaten by Istanbul Burger King manager for eating customer’s leftover food
British Muslim leaders outraged after Eric Pickles says followers of Islam should 'prove their identity'
UK terror fears: My jihadist son returned from Syria mentally scarred – now he is being ignored
Nigel Farage: NHS might have to be replaced by private health insurance
Billy Crystal: 'Stop shoving gay sex scenes in my face'
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
iJobs Money & Business
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...
£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village