Young adults resort to 'bankruptcy lite'
Posted in 'Dealing with Debt' by Barry Stamp
30 December 2011
More young adults are turning to bankruptcy, according to official sources. Since they were introduced in 2009, one in four people who have taken out Debt Relief Orders Service. DROs are commonly known as ‘bankruptcy lite’ and are a form of insolvency available only to those with few assets, low income and relatively low levels of (DROs) fall into the 25-34 age category according to the Insolvency debt.
In an attempt to address this growing problem, the Insolvency Service has launched a “Dealing With Your Debt” campaign which tries to encourage debt-stressed young adults to seek help at an early stage.
The campaign is supported by several free debt advice charities including the Citizens Advice Bureau, Money Advice Trust (MAT) and the Consumer Credit Counselling Service (CCCS).
Joanna Elson, CEO of Money Advice Trust commented: "Many struggling 25 to 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. For today's 25 to 34-year-olds the picture is much bleaker. The good news is that help is available and free advice services can make a big difference."
"Traditionally when young people have borrowed money it has been with the expectation of a continual rise in earnings over coming years. Young people of today may have borrowed with the same expectations, but the difference is that those expectations have not been realised, leaving many struggling to meet agreed repayment plans.”
"At the same time it is getting more expensive to fill up the car, heat the home and put food on the table. The combined effect of all these pressures is that more young people are looking for a different solution to help them back on their feet, and for some the most suitable option is a debt relief order."
We reported on the rise and rise of DROs just six weeks ago, and how they have been displacing Individual Voluntary Arrangements (IVAs) as the ‘easier’ bankruptcy option.
But whatever form of bankruptcy is chosen, the upshot is the same. It will stay on your credit report for six years and on HM Land Registry records for twelve years. Bankrupts willl have trouble getting credit even after discharge, and even opening a bank account is difficult.
Some debts, such as student loans, remain totally unaffected by insolvency and remain due.
You can check your credit report for insolvencies by accessing our Multi Agency Credit Report - it’s free to trial for 30 days, then costs only £9.99 per month until you cancel, which you can do at any time. Our Multi Agency Credit Reports are the most comprehensive available in the UK – containing more than twice the information than any other credit report.
Barry is a Chartered Banker and a Fellow of the Institute of Credit Management. He has a degree in Statistics and Business Economics from the Open University. Barry writes mostly on news from the worlds of banking and mortgages.
Barry is Managing Director at checkmyfile.
With the Government widening the eligibility criteria to be able to enter a debt relief order, the number of people selecting that option has increased sharply this year - which is now being referred to as ‘bankruptcy light’.
Research carried out by the Government indicates that there could be an improvement in the mental health of those with debt issues if they could gain relief without needing to go through bankruptcy.
The favoured option certainly appears to be a Debt Relief Order as, while the number of DROs continues to increase, the number of individuals declaring themselves bankrupt has declined by 10.8%.
Sarah Albon, of the Insolvency Service explains, “Personal insolvencies are lower than a year ago. The chang .....
County Court judgments (CCJ) can have a serious negative impact on your score, so it is important to know what they are and whether it should be there when checking your credit report. A CCJ will remain on a credit report for 6 years from the date of judgement, whether the outstanding balance has been settled or not.
A county court judgment is the result of the court acknowledging that you owe money to someone, after that body has taken court action applying for the judgment. The judgment will be sent in the post and gives information regarding the amount owed, how to make payment, the deadline for payment and who to pay.
When a court judgment is issued you have a few options to respond with, a form will be sent that you nee .....
Unsecured consumer credit debt in the UK grew by more than £1.9bn in March, according to the Bank of England
Page: 1 of 44