Figures released by R3, the Association of Business Recovery Professionals, have revealed that the number of personal insolvencies in the UK has risen for the first time in four years for quarter 2 of 2014.
After reaching a record high of 32.4 insolvencies per 100,000 adults in England in Wales back in 2010, numbers fell steadily over the next four years. So why the sudden upturn to 22.8 per 100,000 in the last quarter?
One reason could be the growing popularity of two alternatives to traditional bankruptcy: Individual Voluntary Arrangements (IVAs) and Debt Relief Orders (DROs). Whilst IVAs and DROs are still forms of insolvency, both solutions can impose fewer restrictions and limitations on an individual’s personal and working life – making them a more attractive option than declaring bankruptcy in certain circumstances.
However, R3 also suggests other explanations for the recent hike in insolvency levels. These include the growing ‘debt culture’ amongst students and graduates, who have become used to living in debt due to the necessity of taking out large student loans to get through university.
On top of this, many people are also finding themselves unable to get on the housing ladder due to rising property prices. As a result, a ‘spendthrift attitude’ can develop, which can soon lead to debt levels spiralling out of control.
‘Living with debt can quickly become the norm when you’re in one or both of these situations,’ explains Andy Gorton, Managing Director of bankruptcy advice service, Bankruptcy Clinic. ‘You’re already saddled with student loans and other debts, but if you earn a decent salary, it’s easy to get more credit to fund a nice lifestyle.’
‘However, if you’re not careful, you could end up struggling to meet your monthly repayments. Your earnings could change unexpectedly too – according to the Money Charity’s October 2014 statistics, 1,000 people were made redundant every day between May and July 2014 – leaving you with little or no disposable income.’
Other statistics included in the Money Charity’s latest report shed further light on the current insolvency and household debt situation in the UK:
- In August 2014, someone was declared bankrupt or insolvent every 4 minutes and 51 seconds. That’s 297 people every day.
- In total, UK consumers owed £1.455 trillion at the end of August. That’s an extra £521 per adult compared to August 2013 figures (£1.429 trillion).
- The average household owed £55,008 in August, including mortgages. Per UK adult, that’s £28,818, or 16% more than the average annual salary.
- In July 2014, UK consumers spent £1.522 billion on plastic cards across 32.1 million transactions.
- Around 9.24 million households have no savings, whilst another 3.43 million have less than £1,500 in the bank.
‘With numbers like these, it’s no surprise that we’re seeing a spike in personal insolvencies,’ says Andy. ‘You’re certainly not alone if you’re in a situation where you can no longer make ends meet. The important thing is to seek help sooner rather than later, whilst there’s still time to explore your debt management options.’
Bankruptcy Clinic is here to help
The specialist team at Bankruptcy Clinic speak to dozens of people every day who’ve fallen into debt for all kinds of reasons. We’re here to assist, not judge, so whatever your circumstances, you’ll find us friendly, approachable and helpful.
Once you’ve given us an overview of your finances, we’ll pass your details to an expert debt adviser at our partner firm, MoneySolve Ltd – one of the UK’s leading debt management firms. They’ll help you find and implement the right solution for your money problems, providing advice and support at every stage.
Your debt management options
Bankruptcy Clinic can introduce you to a range of debt solutions, from informal Debt Management Plans (DMPs) to formal insolvency options like bankruptcy, IVAs and DROs. Customers in Scotland can access Protected Trust Deeds, or PTDs, (the Scottish version of IVAs) through our Scottish partner firm.
You’ll find more information about all these solutions on our website, so you can get an idea of which options might be open to you before you contact us. Then, when you’re ready, it’s time to get in touch and start overcoming your debts – for good.
Contact Bankruptcy Clinic today
Call us free on 0808 168 7389, or 01625 462 770 from a mobile. Or fill in our quick contact form and one of our friendly advisers will call you back.