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 Stamp is a co-founder of checkmyfile.
The debt charity, StepChange, has seen a surge of people asking for help with council tax arrears in the past year, with their recent survey showing a 77% increase.
In 2012 StepChange helped 25,500 people in arrears, a number that has risen to 45,561 in 2013, with the average person £102 short of the money needed to pay their bill.
StepChange's chief executive, Mike O'Connor was quick to explain where he thinks the blame lies. "Stagnating incomes, changing work patterns, rising living costs and changes in welfare benefits are a toxic combination" he said. The analysts behind the survey also believe the government Council Tax Benefit reforms of April 2013 to be a contributing factor.
The government implemented those ch .....
The Low Commission, headed by Lord Low has recommended a levy be placed on payday lenders to fund debt advisory services.
The commission, an independent enquiry into the effects of cuts in legal aid on social welfare, heard from one MP witness that consumers were using MP's surgeries to try and get legal advice, after the last round of legal aid cuts made seeking professional advice more expensive. Andy Slaughter, the shadow justice minister claimed: “Major advice agencies like Shelter and CAB [Citizens Advice Bureau] are able to answer less than half of the vastly increased numbers of inquiries from people in desperate need.”
A key recommendation is for a £100m annual fund for local advice centres across England and Wales. M .....
Well, the top five are, and 21 of the worst 50 are. So maybe it's not quite so nice to be beside the seaside after all.