Insolvency Service (National): 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.ukand 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.

“Effective free, independent money advice is available from a range of organisations through a variety of different channels including face to face, telephone and online.”

Notes to editors

Information on dealing with your creditors is freely available and those in debt should not consider adding to that debt by paying for financial advice. The OFT recently praised The Insolvency Service publication “In debt dealing with your creditors” which can be freely downloaded from the website: http://www.insolvency.gov.uk/pdfs/guidanceleafletspdf/indebt-web.pdf

2 Insolvency statistics published by The Insolvency Service show that for the last financial year (2009/10) there were 139,571 individual insolvencies in total (of which 72,480 were Bankruptcy Orders, 17,475 were Debt Relief Orders and 49,616 were Individual Voluntary Arrangements. The statistics can be viewed at: http://www.insolvency.gov.uk/otherinformation/statistics/insolv.htm

3 The Insolvency Service administers the insolvency regime, investigating all compulsory liquidations and individual insolvencies, through the Official Receiver to establish why they became insolvent. The Service also authorises and regulates the insolvency profession; deals with disqualification of directors in corporate failures; assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees; provides banking and investment services for bankruptcy and liquidation estate funds; and advises ministers and other government departments on insolvency law and practice. Further information about the work of the Insolvency Service is available from http://www.insolvency.gov.uk

4 The Consumer Credit Counselling Service (CCCS) is the UK's leading debt charity, giving help and advice to people struggling with debt. CCCS’s ethos is to help the “can’t pays”, not the “won’t pays”, and does not condone debt avoidance. CCCS always aims to help its clients pay back what they owe, in a realistic timescale and manner that is suited to each individual’s situation. CCCS has a free phone helpline (0800 138 1111), open 8am to 8pm, Monday to Friday and they operate Debt Remedy, an online counselling service available round the clock at http://www.cccs.co.uk/" href="http://www.cccs.co.uk/">www.cccs.co.uk for those who prefer an anonymous option. CCCS media enquires should be directed to, Una Farrell, Media Relations Manager 07950 469 101.

5 The Money Advice Trust (MAT) is a charity formed in 1991 to increase the quality and availability of money advice in the UK. MAT’s vision is to contribute to reducing unmanageable debt of UK consumers and its mission is to support individuals in the UK with unmanageable debts and to improve the capacity, quality and efficient delivery of free-to-client independent money advice, through: co-ordination, Influence, direct service provision, training, research and information. For further information please contact: Paul Crayston, Media Officer, Money Advice Trust,paul@moneyadvicetrust.org 020 7653 9741 / 0789 1431 555.

6 The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more information in England and Wales see www.citizensadvice.org.uk To contact the Press Office call: 0207 833 7078. Out of hours media queries: 0845 099 0107.

7 For case studies and other media enquires, please contact The Insolvency Service press office.

Denise Rawls Press Manager 020 7674 6910
Jemima Broadbridge Press Officer 020 7637 6642

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