Fewer people declaring bankruptcy…but for how long?

Monday, November 8th, 2010 at 4:26 pm

Recent figures have shown that fewer people in the UK went bankrupt in the last few months as statistics show that there were just over 33,000 personal insolvencies in the last quarter which is nearly 4% fewer than during the same period last year.

Insolvency figures are made up of all forms of bankruptcies, individual voluntary arrangements and Debt Relief Orders.

Research by R3, showed that the official figures on personal insolvencies were just the beginning, with approximately one million more individuals in the UK believed to be struggling with unmanageable debt. These one million people are currently not seeking advice for their debt problem’s and there is a further half a million people in debt that are currently taking advice to try and overcome their financial difficulties.

Scotland has the unwanted honour as being top of the UK’s bankruptcy list; despite an overall 4% fall, Scotland has more than double the amount of insolvencies than England and Wales. This is particularly worrying at a time of low interest rates, and many financial experts believe that debt debt-uk problems will explode once interest rates in the UK start to rise.

Figure’s from the Council of Mortgage Lenders show that, if mortgage rates in the UK rise by just 2%, nearly 3 million homeowners would no longer be able to afford their mortgage payments.

Many people will simply not be able to afford this increase and find themselves in a position where they are no longer able to pay their debts. This does not mean that homes will be repossessed as people who are over their heads in debt can turn to debt management plan’s or IVA’s in order to reduce their unsecured debts to free up money to pay for their mortgage.

Debt charities say they have never been busier and with many individuals taking out debt management plans, it could be assumed that the number of insolvent individuals in the United Kingdom is actually increasing, given the fact that these debt management plans are not in the official insolvency figures.

Another potential problem problem that is due to hit the UK is the VAT hike that is due to hit in January 2011. People who are already struggling to pay their debts could well be pushed over the edge by increases such as this.

In the current economic environment, it is imperative to anticipate financial difficulty and start making plans to deal with it effectively. If you feel that you are struggling with debt problem’s you should seek advice immediately.