Jan 2011. New Year Debt

Dealing with debt is crucial to reduce record numbers of personal insolvencies

Levels of personal insolvency are starting to decline following a steady upward trend over the last ten years says The Insolvency Service. In 2009 personal insolvency numbers were the highest for 20 years. In 2010, despite a slight drop, the number of people entering into formal insolvency procedures remained relatively high, showing that more needs to be done to encourage people to manage their money better, and where possible, to avoid insolvency.Insolvency affects different groups of people in different ways: * Britain’s pensioners are shown to be the fastest growing group of bankrupt individuals in the UK. Although levels of bankruptcy among men and women aged over-65 are the lowest in the UK, the numbers of bankrupt individuals in this age group have increased six times in a decade and at a 50% faster rate than for other age groups; * Men still make up the majority of bankrupts (60% in 2009) but the proportion of women bankrupts is growing (from 29% in 2000, to 40% in 2009); * The average age of a bankrupt individual in the UK is 41, which is close to the average age of the population (39.5yrs). * Among women aged over-65, the rate of bankruptcy has grown even more sharply, over ten times between 2000 and 2009 and in London it is 43 times higher; * Since they started in April 2009 to the end of September 2010, 30,838 people have taken out Debt Relief Orders, to free them from unmanageable debt and support them in making a fresh financial start. * The average age of a person with a Debt Relief Order between April-December 2009 is 40 years-old, which is comparable to that of a bankrupt for the same period (41 years-old). To encourage more people to deal with their debt, The Insolvency Service is running a week-long (3-8 January) ‘Dealing with your debt ‘ campaign, supported by charity sector partners, Citizens’ Advice, the Consumer Credit Counselling Service and the Money Advice Trust. When entering into a personal insolvency procedure more people need to be aware of where they can go to get free advice and that the insolvency regime offers them more than just bankruptcy. There are plenty of reputable organisations that supply debt management advice for free. Stephen Speed, Chief Executive of The Insolvency Service said, “Although personal insolvency levels are no longer rising, they remain stubbornly high, reflecting the high levels of personal debt that persist across the country. “Prevention is much better than cure as far as personal finances are concerned. Review your personal finances frequently and make sure you are not taking on debt that you can’t afford to repay. “If you are getting into trouble, act quickly and seek advice about how to deal with it. There are plenty of sources of advice, many of which are available free of charge. If insolvency looms then remember that you have choices. Discuss these with your adviser and make sure you understand which one is best for you. The Insolvency Service’s booklet, “In debt? Dealing with your creditors” provides clear and impartial information that will help you understand your options.” The awareness raising campaign aims to encourage individuals with debt problems to deal with their financial situation responsibly by:- knowing where they can obtain free debt advice and; * understanding the options available to them if their level of debt is unmanageable. Adding support to the campaign Citizens Advice Director of Policy, Teresa Perchard said: “Post Christmas is a stressful time for many people who are struggling with their debts. Citizens Advice Bureaux are seeing more and more people every year who have trouble making ends meet and covering the most essential household bills. Money troubles don’t go away by themselves, as the shocking increase in the number of people seeking bankruptcy shows. “The good news is that free help and advice is available on our website www.adviceguide.org.uk and trained advisers in Citizens Advice Bureaux and other money advice agencies can help you prioritise your debts, negotiate with creditors and provide advice on a range of debt remedies. We want to help you find a solution that is right for you. But the key is to get advice early. If you are at all worried about your finances, don’t delay, get help.” Una Farrell, from the Consumer Credit Counselling Service, said: “Dealing with debt is particularly hard as you get older as you are likely to have limited opportunities to increase your income. CCCS clients aged 55 and over, have on average, higher debt levels but lower incomes than overall CCCS clients. "The average debt for a CCCS client over the age of 55 is £25,826 compared to £24,274 for CCCS clients overall, while the average annual income of a CCCS client over the age of 55 is £12,920, significantly lower than £17,316 for CCCS clients overall. "It is very difficult to be struggling financially at a time in your life when you had expected to be more settled. However, there is free help available for those who find themselves in this situation. Anyone worried about debt should seek free advice that is available from a debt charity such as CCCS, National Debtline or their local Citizens Advice Bureau." Joanna Elson OBE, Chief Executive of the Money Advice Trust said: “The financial difficulties of the last few years have accelerated a longer term trend of more and more people struggling with debt. Debt advice charities like ours have had to bring about a step change in our capacity, not just to help people out of their immediate debt problems, but also to help them back into financial health and ensure they have the knowledge to avoid debt problems in the future. “With potential rises in both unemployment and the cost of credit, 2011 could be a very difficult year for people struggling with debt. It is vital that anyone grappling with debt problems is able to make informed decisions and understand all of their options; the best way to do that is to seek advice from independent experts. However, our research shows that just one in six people with a debt problem seek advice – a statistic we hope to change this year. “The good news is that free, independent advice is available, and that the free-to-client advice sector has successfully developed to meet the huge growth in demand we have witnessed. We are working closely with our funders including Government to ensure that this capability continues to exist through 2011 and beyond. For enquiries please Email: ndsenquiries@coi.gsi.gov.uk