Official figures released by the Insolvency Service show that 25- to 34-year-olds are the single biggest group using debt relief orders (DROs).
Since DROs were introduced in April 2009, 44,000 have been granted in England and Wales, with 1 in 4 of those resorting to a DRO aged between 25 and 34.
If you have debts of up to £15,000 and are struggling to make the payments, have no more than £50 disposable monthly income, have savings and assets of less than £300, and don’t own your own home, a DRO enables you to write off your debts.
The figures show the extent to which young people are suffering in the current economic climate, and it has been suggested that increasing student debt could make the situation worse. Student loans aren’t covered by DROs, but they are often a contributing factor when a young person becomes insolvent.
According to Joanna Elson, chief executive of the Money Advice Trust, financial realities don’t match up with the expectations many 25- to 34-year-olds grew up with – “at the same age their parents would most likely have bought their first home, have a comfortable pension lined up, and be saving for the future. For today’s 25-34 year-olds the picture is much bleaker,” she said.
The Insolvency Service’s figures indicate that, over the last 2 years, 1 in 3 people under 25 who were granted a DRO owed less than £5,000, whilst other age groups tended to owe more. 40% of those aged over 25 owed between £10,000 and £15,000.
At the end of April 2011, personal debt in the UK amounted to £1,452 billion – the current sum total of personal debt is almost equal to the country’s entire GDP for 2010.
The average household debt stands at £55,854 (or £8,121 if mortgages are excluded) – a property is repossessed every 14 minutes in the UK and landlord possession orders are made 265 times a day. £179 million is paid in interest every 24 hours, and an individual is declared bankrupt or insolvent every 4.36 minutes.
The total amount of lending in April 2011 increased by £1.2 billion (there was a £700 million increase in secured lending and a £500 million increase in consumer credit lending). At the end of April, total secured lending had reached £1,241 billion and total consumer credit stood at £211 billion.
In the past year, £9.5 billion of loans were written off by UK banks and building societies, which is equivalent to £20.71 million every day, and the Citizens Advice Bureau deals with nearly 10,000 people struggling with debt problems daily.
Redundancy is fuelling increasing levels of debt, with 1,384 people made redundant every day and 850,000 unemployed for 12 months or more.
Yes, that is an alarming statistic, indeed. 391 people everyday of the year will be declared insolvent or bankrupt in 2010, equivalent to 1 person every 51 seconds during the working day. This is a worryingly steep climb when you take into account that this figure was one in every 4.5 minutes in 2009, only a slight increase from 4.8 minutes in 2008. Source: http://www.creditaction.org.uk/debt-statistics.html
There has been much talk of late regarding the financial state of both individuals and businesses within the UK. And with stats to back up that talk, one that stands out and strikes terror into the current state of financial affairs is that of insolvency. It has unfortunately given plenty of ammunition to the merchants of gloom and doom, especially when you consider that there is no reason to believe that the number of recorded insolvencies will not continue to rise.
Actually, these figures only record formally registered insolvencies and don’t include those who have undertaken certain financial plans such as a DRO (Debt Relief Order) or IVAs (Individual Voluntary Arrangements).
So what is the origin of this alarming statistic? Well, in the current climate, people have been struggling to spend on necessities, never mind investing in luxury purchases. Homeowners are finding it tough to keep up with higher interest rates and resorting to credit cards. They then in turn have those to keep up with that those repayments also. Basically, far too many People have over-borrowed and are struggling to pay back their debt. Also, many of these people are business owners and are also feeling the pinch. If they’re not receiving the same level of incomings, how can they spend their normal allocated budget on promotion, staff etc.
One can be forgiven for feeling that there is no way out but the good news is that there is help available. The typical first port of call to resolve personal insolvency is a debt management plan. This is an informal, non legally binding agreement with creditors to reduce monthly debt repayments. Thousands of people turn to debt management plans each month to deal with their insolvency.
MoneySolve can offer free and confidential, expert advice. Call them now on freephone: 0800 040 7064.
The latest batch of finance stats from Credit Action reveals that unemployment in the UK is at its highest level in 16 years. There are 2.51 million unemployed adults of working age in this country at present, something certainly fuelling our ongoing personal debt problems. Perhaps more alarmingly is the fact that over 750,000 of those people have been unemployed for more than a year.
These figures have been released alongside statistics showing that someone in the UK is declared bankrupt or insolvent every 51 seconds. With an average household debt £57,915, the loss of a job can be a devastating blow, leading to a complete inability to meet your monthly financial commitments.
If you’re struggling to make ends meet or just want expert, confidential debt management advice, get in touch with MoneySolve today on 0800 040 7064.
Millions of British consumers are spending beyond their means in order to maintain a lifestyle they feel they ought to enjoy, according to a recent report.
A study carried out by Moneysupermarket.com has suggested that as many a s 15 million Britons are using borrowed money to fund what might be considered a middle class way of living.
Unsecured loans taken out for these reasons are believed to be worth close to £35 billion and could be causing thousands of families to experience serious debt problems and financial constraints.
For many people, their earning power does not match up to their expenditure and as a result debt management issues are becoming increasingly prevalent as the credit crunch unfolds.
"Consumers need to take immediate stock of their household budgets to identify the pressure points and seek money saving opportunities," said Richard Mason, managing director of insurance and home services at Moneysupermarket.com.
A report from the TDX Group recently suggested that the number of people entering individual voluntary arrangements in the UK is set to increase dramatically over the course of 2008.
Prime minister Gordon Brown has been heavily criticised by opposition MPs for what has been described as his "economic incompetence".
Millions of people are suffering with serious debt management problems and the prime minister is largely to blame, according to the Conservatives.
The Tories have insisted that Mr Brown’s policies during his time as chancellor served to encourage consumers to borrow more money than they could realistically afford to pay back.
"Gordon Brown failed to prepare, he borrowed in a boom and allowed the debt bubble to grow. Now the whole country is paying the price," said shadow chancellor George Osborne.
Mr Osborne’s comments came in response to data from the Halifax that showed the average house price in the UK fell by close to 2.5 per cent over the course of last month.
Earlier this week, the National Association of Estate Agents called on the Bank of England to cut interest rates in order to bolster the flagging housing market.
The personal loan market has been hit by the credit crunch, an expert has warned.
Samantha Owens, head of personal finance at Moneyfacts.co.uk, asserted that many lenders have hit borrowers with large one-off increases as well as smaller rises in the cost of borrowing.
Furthermore, she warned that the fact that Britons are willing to pay greater sums for credit shows there are problems.
Ms Owens stated that this "is yet another sign that we are all too dependent on borrowing and are willing to accept a higher rate to ensure we get the funds".
A recent study conducted by financial advice website unbiased.co.uk showed that during 2007, British people borrowed a further £11 billion.
David Elms, chief executive of the website, described last year as a "turbulent" financial period.
He added that consumer borrowing has reached a worryingly high level and that it is vital people seek to regain control of their outstanding credit commitments.
The world’s biggest credit insurer has warned that insolvencies are likely to rise across the western world as the credit crunch bites and the housing boom ends.
It noted that although recent levels of insolvency across the world have been low, a combination of economic factors makes it extremely likely they will rise over the remainder of the year, Reuters reports.
Nicolas Delzant, member of the board at Euler Hermes, told the press: "The scene ahead is not catastrophic but we have to be very cautious because we have a change in the world economy that can have an effect on many countries."
For both companies and individuals in Britain, the credit crunch has caused finances to become tighter.
Some people have been relying on credit to refinance their existing borrowing and now that banks have begun to tighten their lending criteria, they may be experiencing problems.
Accountancy giant KPMG has predicted that the UK will see a rise in insolvency numbers over the rest of 2008.
Although the Band of England reduced the base rate last month, the average fixed-rate mortgage has risen in cost, a new report has claimed.
Online price comparison website moneysupermarket.com has warned that despite a slight fall in price for those applicants with an "excellent" credit score, most people seeking a new fixed-rate will find themselves worse off.
Louise Cuming, head of mortgages at the website, said homeowners who put off locking into a fixed-rate deal in the hopes of an interest rate cut will now be worse off.
"I shudder to think what would have happened to the average fixed-rate mortgage if the Bank of England hadn’t cut rates," she added.
For some households, the rising cost of their mortgage repayments will combine with the increasing cost of fuel and food to place additional strain on their finances.
There has been speculation that this economic situation will force more people into insolvency in 2008, as the credit crunch impacts their ability to refinance.
People who overspent at Christmas will face the prospect of debt troubles over the next few weeks, according to an expert.
Susan Hales, Citizens Advice casework supervisor for money advice at Grimsby, Cleethorpes and district area, made her comments to the Grimsby Telegraph, explaining that as the credit card bills arrive in the post, many debtors realise they cannot manage.
However, she added that there is no average level of debt experienced by those with money problems.
"One person can come through the door with £100 worth of debt and find that as crushing as someone else who has £75,000," Ms Hales continued.
She warned debtors to consider what payments should be their main priority, highlighting that while failure to pay a credit card bill could lead to court action, failure to pay a mortgage could cause the loss of the family home.
Recent research by accountancy firm Grant Thornton predicted that 28,000 people face bankruptcy during the first three months of 2008, of which a third are likely to be facing insolvency as a direct result of their Christmas spending.