Personal Insolvency Cases Continue to Soar
Recent figures published by the Insolvency Service have shown that the number of personal insolvency cases in England & Wales in the third quarter of 2009 has risen by a staggering 28% from the same period in 2008.
There were over 35,000 personal insolvencies in these 3 months which represents a 6.6% rise on the figures for the second quarter of 2009.
Insolvency factors
The large increase in levels of personal insolvency cases can be attributed to two main factors;
Redundancies – With the impact of the recession leading to high numbers of redundancies, it has left many people with no significant means of income and a substantial amount of outstanding debt.
With millions of people in the UK having little or no savings to fall back on, the blow of being made redundant can have a devastating effect on their personal finances which often results in insolvency.
The credit crunch – The credit crunch meant that people who would have previously been able to borrow from one company to pay off another and juggle their debt problems could no longer do so.
The reluctance of banks to lend for mortgages also affected the housing market, so people were unable to release equity in their homes or sell up and use the capital to pay off their debts.
Insolvency options
When you’re struggling with your debt repayments and are looking for a permanent solution rather than a quick fix, there are a number of options open to you, including;
- Bankruptcy – 6.4% increase in cases compared to the third quarter of 2008
- Individual Voluntary Arrangements (IVAs) – 20.9% increase on the same period last year
- Debt Relief Orders (DROs) – these have only been available since April 2009
We’ve compiled a brief introduction to these 3 types of debt solution below, but it’s critical that you seek professional debt advice based on your individual circumstances before making any decisions.
Bankruptcy – the most severe form of debt solution for many people as it can result in your home being sold off, and could lead to you losing your job if you’re a member of a professional body such as an accountant or lawyer.
Bankruptcy will also significantly harm your credit rating and should only be considered as a last resort when all other options have been explored.
IVAs – An individual voluntary arrangement is legally binding and your IVA proposal must be voted on by your creditors. An IVA requires you to pay back an agreed affordable monthly sum for the benefit of your creditors for a typical period of 5 years.
(Please note that an IVA will affect the customer’s credit rating for 6 years and failure to keep to the terms of the IVA can lead to bankruptcy)
DROs – debt relief orders were introduced by the government in April 2009 as a cheaper type of insolvency solution. DROs are designed to help people with levels of debt lower than £15,000, who do not own their own home, have few assets and a very low level of spare income after normal household expenses (maximum £50 per month).
Certain types of debt such as student loans are not allowed to be included under the terms of your debt relief order.
If you’re worried about your debt repayments and are looking for a lasting solution, remember it is crucial that you get professional debt advice tailored to your own circumstances.
Contact us today for confidential debt advice you can trust.
(Source: Statistics Release: Insolvencies in the Third Quarter 2009, The Insolvency Service, 06/11/2009)