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bankruptcies

Bankruptcy, Debts, Financial, Financial Management, IVA, Loans, Money, Personal Finance

The latest report from the Insolvency Service shows a rapid rise in the numbers of people being declared insolvent

Commenting on statistics from the Insolvency Service showing a sharp rise in insolvencies, both over the last quarter and over the past year, Debt Advisers Direct have said that it is now more important than ever for people to get their finances in order and tackle any debt problems as soon as possible.

Commenting on new statistics showing an increase in the number of personal insolvencies in the third quarter of 2008, Debt Advisers Direct (www.debtadvisersdirect.co.uk) have said that this is further confirmation of the difficulties faced by many British households due to rising inflation and worsening economic conditions, and have emphasised the importance of good debt advice as the economy faces a recession.

The latest report from the Insolvency Service shows a rapid rise in the numbers of people being declared insolvent. Between July and September there were 27,087 personal insolvencies, an 8.8% increase on the previous quarter. It was also 4.6% higher than the number of insolvencies reported a year earlier.

Despite falling in the second quarter of the year, bankruptcies were up 12.1% over the quarter. IVAs (Individual Voluntary Arrangements), meanwhile, were up 3.3% over the quarter.

A spokesperson for Debt Advisers Direct said: “Higher costs of living and the credit crunch have put a lot of pressure on British households’ finances this year, so we expected to see a rise in personal insolvencies over the course of this year.

“However, the extent of the rise in insolvencies shows the seriousness of the problems we are facing – and highlights the need to tackle debt problems early, before they become unmanageable..”

The Insolvency Service report also showed that despite the quarterly rise, IVAs were down by 3.1% compared with the same period last year – with The Telegraph concluding that it may be becoming more difficult to enter into an IVA.

“There are a few possible reasons why the number of IVAs may be lower than this time last year,” the spokesperson commented. “It may simply be that more people are taking the bankruptcy route, perhaps because they are unaware that an IVA can avoid many of the downsides of bankruptcy.

“IVAs are usually considered a preferable alternative to bankruptcy. People on IVAs do not lose control of their assets, unlike bankruptcy, and they typically carry fewer restrictions.

“The rise in IVAs over the quarter shows that lenders still consider it a valid means of reclaiming some of the money they are owed – and it remains that if you are in significant debt, an IVA can be a very useful way of getting debt-free.”

The Debt Advisers Direct spokesperson was keen to emphasise the importance of tackling debts before they grow unmanageable. “For anyone struggling with debt, there are a number of ways out. With a recession approaching, it’s important that people do not feel powerless, and that they tackle the issue head-on.

“There are a number of debt solutions, such as debt consolidation and debt management plans, that can help people to stop their debts growing before they become unmanageable. We advise anyone with debt problems to seek professional advice at the first sign of trouble.”

Via EPR Network
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Banks, Checking & Savings, Financial, Financial Services, Financial Solutions, Home Equity, Loans, Money, Mortgage, Personal Finance

ThinkMoney.com advise homeowners not to become complacent about protecting themselves against the current downturn in the housing market.

Responding to the recent report from the National Housing Federation suggesting house prices will recover and rise by 25% by 2013, financial solutions company ThinkMoney.com advised existing homeowners to remain optimistic, but warned them not to become complacent about protecting themselves against the downturn in the housing market.

The National Housing Federation anticipates further falls in house prices for the next two years – 4.4% in 2008, with a further fall of 2.1% in 2009 – after which prices will begin to recover, rising by 25% by 2013.

However, the report itself acknowledges that the figures depend on a ‘robust employment market’, and warns that if employment and consumer spending levels fall by too much, the housing slump could be more severe than they have predicted.

A spokesperson for ThinkMoney.com said: “We would advise homeowners to continue saving well, spending responsibly, and to remain aware of the potential problems facing the housing market. Your financial planning should, as always, be geared towards making sure you are prepared for any problems that could arise.

“The report is only speculative, and as with anything, it is very hard to predict what will happen in the next five years. The predictions are essentially a best-case scenario,” she said.

“In a sense, it’s healthy to be slightly cautious when it comes to money, especially with an important financial commitment like a mortgage.”

The spokesperson said that there are a number of ways homeowners can protect themselves. “Savings are the key,” she says. “Falling house prices means that equity tied up in the value of your home is decreasing, so it’s wise to try and counteract that by saving money where possible.

“This also acts as a buffer if you find the interest on your mortgage payments going up in the next few years, which is quite possible. Without savings to fall back on, mortgage payments could become simply too expensive for poorer families, and that brings the possibility of falling into debt – especially with other costs of living rising so quickly too.

“Likewise, it’s important to keep an eye on spending and make sure unnecessary purchases are kept to a minimum. Avoid taking out consumer finance loans on expensive goods, as they can become a big financial burden when things get tight,” she continued. “In fact, avoiding any form of personal loans or credit is the best defence against getting into debt.”

The ThinkMoney.com spokesperson advised homeowners to remain positive. “Many homeowners will be relatively unaffected by the problems in the housing market, so long as they are willing to stay put,” she said.

“A loss in the value of your home only affects you if you are looking to sell, but it still pays to save well in case of emergency. And once the market does recover, you may even find yourself in a better financial situation than you were before all the trouble started.”

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Bankruptcy, Banks, Business, Checking & Savings, Financial, Financial Services, Financial Solutions, IVA, Loans, Money, Personal Finance

ThinkMoney.com anticipates the rise in insolvencies as the slowing economy begins to affect more consumers.

Financial solutions company ThinkMoney.com anticipates a rise in the number of people experiencing debt problems in the coming months, despite a year-on-year fall in individual insolvencies.

A recent report from the Insolvency Service suggested that the number of people entering into IVAs in the second quarter of 2008 had fallen to 9,256, down from 10,561 a year previously – a drop of 12.4%.

At the same time, bankruptcies had fallen from 16,214 in the second quarter of 2007 to 15,297 in the second quarter of 2008 – a fall of 5.7%.

Given the onset of the credit crunch in recent months, the statistics may come as a surprise to many. But Melanie Taylor, Head of Corporate Relations at ThinkMoney.com, said that the falls in both IVAs and bankruptcies should not be taken as a sign of long-term recovery. “Most economists are predicting an economic downturn,” he says, “which certainly doesn’t raise hopes of the number of people in debt decreasing anytime soon.”

Other indicators, such as the Financial Services Authority’s report that repossessions rose 40% in the first quarter of 2008 compared with the same time last year, do indicate a sharp rise in the number of people facing financial difficulties.

Ms Taylor suggested that this could be an early sign of things to come. “As things stand, we would expect the number of people experiencing debt problems to increase fairly significantly, due to a combination of the credit crunch, rapidly growing costs of living and rising unemployment.

“These things take a while to ‘filter through’ to the wider economy. Typically, lower-income families will be hit first, since they have less money to spend – but that then hits the companies where they usually spend money, so their staff are affected too. Eventually, most people are affected financially in some way.

“This in turn could lead to increasing numbers of people who can no longer manage their debts – and it’s essential that these people get expert help as early as possible.”

But Ms Taylor was keen to emphasise that both IVAs and bankruptcy are valid ways of getting out of unmanageable debt. “An IVA can be a great help to people with over £15,000 of debt,” he said. “It allows a significant portion of their debts to be repaid in convenient monthly payments, usually for five years – after which the remaining debt is written off.”

He continued: “There is something of a stigma surrounding bankruptcy, but in the right circumstances it may be the best possible way of making a fresh start.

“People who go through bankruptcy are subject to some restrictions – for example, they are highly unlikely to be able to borrow any more money for a number of years, and they will most probably be forced to sell any valuable assets they own. But once the bankruptcy process is complete, they will be legally debt free, and able to get on with their lives.”

Think Money are a financial solutions company based in Salford Quays, Manchester. The company specialises in a range of financial services, including mortgages, loans, debt help and advice (including debt management plans, IVAs, and debt consolidation).

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