The number of people who find themselves financially insolvent is currently
falling, currently the number is at its lowest since the beginning of the recession
in 2008.

The insolvency Service has been asked if it were not possible to reduce the
costs and red tape involved in declaring yourself bankrupt as this would open
up the number of options that are available to those who are experiencing debt
problems.

Finding Help Can Be As Important As Finding Cash

For many people the lack of money isn’t their only problem, they also find it
hard to get the right help, help in the form of consumer advice, county court
judgment information and the whereabouts of charities and organisations
who can offer advice on managing debt and dealing with creditors. Guidance on
CCJs can be so important to those in debt as understanding the implications of
CCJs, how to deal with the courts and getting advice when declaring your income
and monthly outgoings will have a huge impact on the amount you repay your
creditors each month.

Notwithstanding the continued sluggish economy, household borrowing actually
increased in 2012 on three separate occasions, going against the trends that
have seen borrowing fall in the previous three years. It is thought that increased
living costs and pay increases which don’t meet inflation, effectively incremental
pay cuts, have forced people to take the unwelcome option of borrowing again,
despite the fact that they know it is unwise to say the least. While falling in

every other month since January 2010 unsecured borrowing bumped in March,
September and December 2012 resulting in an average household debt increase
from £5,914 in November to £5946 in December, according to Credit Action.
While that £30 increase doesn’t sound much it comes at a point where most
households are tightening their belts, if the average increases like that it means
that some individuals are sinking significantly deeper into debt

The Insolvency Service said that nearly 110,000 were made insolvent last year,
which is down nearly 9% on 2011. Almost half of insolvency came about as IVAs,
voluntary agreements between individuals and their creditors where people in
financial trouble are able to make repayments over a set period of time, after
which they are free of debt. IVAs are popular both with those people who owe
money and those to whom the money is owed. They come with far fewer of the
repercussions that are associated with bankruptcy, are free to take out while
court costs for a bankruptcy filing cost upwards of £700 and IVAs often lead to
the creditor getting far more of their money back.

While Insolvency Falls, So Does Bankruptcy

The number of people who chose to file for bankruptcy also fell in the same
period, slightly fewer than 32,000. A reduction of 24% compared to 2011. Debt
Relief Orders (DROs) on the other hand rose 7% compared to the previous
year. DROs are another alternative to bankruptcy for those on a low income
who, again, are unable to meet their financial responsibilities where the debt is
less than £15,000. DROs were introduced in 2009 and since then have had an
appreciable effect on the number of bankruptcies which have been taken out,
having seen the numbers fall year after year.

It has been pointed out by organs such as the Money Advice Trust that people
are taking out DROs even if they may not be the best option. People often can’t
afford the £700 required to file for bankruptcy and so take out an unsuitable
DROs instead. For those who are determined to file for bankruptcy it is not
unheard of to take out payday loans to cover the fees, knowing perfectly well
that they won’t be able to repay the short term, high interest loans.

While the number of people who are in employment, either part time or
full, seeking insolvency agreements is currently falling, as is the number of
high street retailers, despite the high profile stories of retailers going into
administration the number of self-employed people who are no longer able to
keep up credit and loan repayments is increasing. It is thought that many have
been taking credit to keep their business afloat yet, while the economy continues
to languish they are finally no longer able to keep on juggling their finances while
they are unable to find sufficient work and are now being forced to call it a day.