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.
Compare with the Independent: See how much you could save by switching credit cards. Compare now
educationTo mark International Women's Day, Sarah Brown on how charities have brought proper joined-up thinking to the delivery of education
- 1 The future of sex: The first female condoms were derided, mistrusted and shunned - but will their modern counterparts catch on?
- 2 South African rhino finally put down after roaming Kruger park for days with horn hacked off and bullet in brain
- 3 Study suggests that 'gaydars' are real - at least for women
- 4 Man stabbed with Legend of Zelda Master Sword in serious condition
- 5 First clip of Outkast's Andre 3000 in Jimi Hendrix biopic All Is By My Side emerges
Apple's Tim Cook: Business isn’t just about making profit
Thousands of young people forced to go without food after benefits wrongly stopped under 'draconian' new sanctions regime
Ukraine crisis: New navy chief 'defects' and surrenders Crimean HQ as Putin claims ultranationalists forced intervention
Ukraine crisis: Russia dismisses '3am ultimatum' as 'total nonsense'
If you're horrified by a flame-roasted dog, you should be shocked at a hog roast
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
iJobs Money & Business
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...
£30000 - £35000 per annum + generous benefits: Pro-Recruitment Group: Mixed Ta...
£30000 - £40000 per annum + benefits: Pro-Recruitment Group: Personal Tax, FTS...
Day In a Page
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square
A charming four-bedroom house overlooking Burleigh Square Park, close to Thorpe Bay
A three-bedroom farmhouse with a large inglenook fireplace and exposed beams
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station
A Grade II-listed home with six bedrooms, secluded landscaped gardens and views across Hadley Green
A Grade II-listed mansion with two apartments and a cottage, near Gretna Green
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew