Bankruptcy on the rise in the UK

This may go in the face of recent data released which indicates that the number of people in the UK filing for insolvency over the last three months has fallen, but according to Free Debt Advice UK have warned of further tough times ahead.

The fact that over 330 people are filing for bankruptcy or insolvency each day in the UK is still a worrying statistic, but the biggest change seen is in the type of people filing for insolvency (middle classes making up a large proportion of those filing for insolvency or bankruptcy protection).

Individual Voluntary Arrangements (IVAs) and Debt Relief Orders (DROs) have both risen to record levels.

One possible reason given for the increase in IVAs is that while they are serious and do have consequences, they are much less severe than bankruptcies. Bankruptcy can in some cases force you to sell your home or release any equity in it to pay your debts, as well as making your name publicly available for anyone who wants to check the register. IVAs are a bit easier overall, yes they last longer (up to 5 years) than filing for bankruptcy does, but you are able to keep your home.

Debt Relief Orders are still a relatively new form of available, considering they were only introduced in 2009. They were brought in to mainly help those on low incomes deal with their large debt problems, anyone who didnt have more than £300 worth of assets which could be sold to pay for debts owed.

This could be a reason why the number of bankruptcies filed has fallen, as more and more people take up IVAs and DROs.

However, some analysts have estimated that over 6m households across the UK are struggling with their finances. It is getting increasingly hard for people to manage their finances and repay their debts, with more and more people being made redundant, wage freezes across many sectors and extremely high inflation.

All things considered, why should you think about going for an IVA?

For one it could effectively write off as much as 90% of your debt. Now this depends on many things, such as how much you owe, how much you can pay back etc, but there is the potential for a phenomenal amount of your debt written off if you actually can’t afford to pay more (it is not like you can just decide that you do not want to pay x amount of your debt, you must put forward an honest effort).

It also replaces all of your debts with one single repayment each month. You will pay your IVA advisor/company and they will in turn distribute it among your creditors. This can be a heck of a lot easier to control and manage rather than juggling around different debts, different amounts owing at different interest rates.

IVAs can help you beat debt and make the whole debt fighting process a lot more bearable than having numerous phone calls and letters making your life a misery. Once the IVA finishes, that’s it.  For news on debt, further information is available at http://www.freedebtadvice-uk.com/