A record 375 people a day will go bankrupt next year, according to predictions by debt experts. This is due to the level of unemployment mounting.
If these forecasts are correct, then the 137,500 total would be an increase of 10% on this year, and 2,400 more than in 2010. Despite this, the Insolvency Service, an executive agency of the Department for Business, Innovation and Skills, has had budget cuts of 15%, resulting in the loss of one in five staff members.
Mike Thomas is a finance expert and founder of debtwizard.com, a service offering debt solutions and free advice. He cautioned: “I fear next year will be the worst since records began in 1960.”
He found the reason for this to be the amount of people avoiding creditors, who will be “pushed” into unemployment after public sector spending cuts. “A lot of people have been putting off, ducking and diving, moving home every six months in the hope that creditors don’t catch up with them,” he warns.
These comments were made just 24 hours after a report exposed that UK job predictions were the worst for 20 years, with unemployment expected to continue rising into 2013.
Debt agencies have therefore advised people to get help if needed. If people have spent too much over Christmas, they are urged to seek attention promptly.
The Insolvency Service, who deal with affairs of bankruptcy, have released figures that reveal more young people than ever are approaching Debt Relief Orders (DRO) to protect themselves from creditors. Declaring bankruptcy costs £700, whereas a DRO costs just £90
A quarter of the 44,000 people who have taken out DROs are aged 25-34. The Consumer Credit Counselling Service’s Una Farrell explains, “These figures highlight the difficult financial situation many young adults are in. Many face a future of higher debts and fewer assets than older generations.”
The causes of this could be the lack of job opportunities, rising costs of university fees, and the amount of legal loan sharks. The number of 16-24 year olds out of work last month passed 1 million. This is the highest total on record.
The Chief Executive of the Money Advice Trust, Joanna Elson mentioned that many of the struggling 25-34 year olds might have expected to be further up the financial ladder by now. “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,” she says. “For today’s young people the picture is much bleaker.”
It has also emerged that 78,970 people owe their landlords at least two months’ rent, the highest level since 2008. The number of people in severe arrears has additionally gone up 11,400 in the past year.
Nevertheless, the overall level of tenants in England and Wales who still owe rent is falling, at just 9.3% of all unpaid or late rent in November.
These figures were published by Templeton LPA, chartered surveyors, who said: “Given the challenges we face and the worsening labour market, we anticipate overall arrears and severe arrears will rise in 2012. This will lead to increased tenant evictions.”1
24,966 tenants were evicted by court order in the last quarter of 2011, which is up from 22,558 a year ago.
1 http://www.justlandlords.co.uk/news/Unemployment-Soars-and-People-in-Severe-Arrears-1054.html