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Expected Level of Insolvencies in 2011

The year 2011 is expected to have the largest number of personal insolvencies the UK has ever seen.  Some 140,000 people are thought to be likely to experience insolvency, up from the 135,000 reported in 2010 by the Insolvency Service.  The 2011 estimate was put forward by the accountancy firm of RSM Tenon.

 

Personal insolvencies are the result of unmanageable debt levels and can lead to bankruptcy or other debt solutions such as IVAs (Individual Voluntary Arrangements).  Personal debt levels are expected to rise in 2011 due to increased inflation, record gas and oil prices, the VAT increase and government cuts.

 

Many people are still in danger of losing their jobs as the full effects of the government’s austerity programme come into play.  Public sector workers are especially impacted, but many private sector workers are also under pressure from rising living costs and static or even reduced incomes.  Interest rates are expected to rise later in the year, adding to the general economic gloom.

 

Insolvencies are increasingly common for women, narrowing the gap between the sexes.  The most at risk are over 65 year olds.  Record numbers of older people are likely to experience personal insolvency in 2011, with pension payments not being enough to cover their living costs and the likelihood of other income lower than for other age groups.

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Research published by the credit agency Experian shows, however, that married middle class couples are also increasingly at risk of experiencing personal insolvency.  This demographic, often called the “squeezed middle” by UK politicians, accounted for just over ten per cent of personal insolvencies in 2010.  In contrast, the demographic of welfare dependent individuals or families accounted for eight per cent of personal insolvencies in 2010.

 

Bankruptcy is the most radical solution you can choose to deal with unmanageable debts.  It involves handing over control of your financial affairs to a trustee, who sells off your remaining assets and deals with your creditors.  The effects felt on your life after bankruptcy last longer than those associated with other debt solutions such as a Debt Management Plan, debt consolidation or an IVA.  Being made bankrupt means you face restrictions: you cannot borrow in excess of £500 without having to tell the lender that you are bankrupt, your bank account is closed and you cannot run or own a company without court permission.

 

It is important to remember that while being made bankrupt is potentially an option, it may not be the only option.  There may be a lot of information and advice coming your way when you experience unmanageable debt, so it is important to seek out reliable bankruptcy information.  Specialist advice and counselling from the Debt Advice Group can help you put your debt into perspective.

 

Knowing in advance that 2011 is likely to be a hard year may help you avoid getting into excessive debt.  It may be possible to cut your spending in areas such as childcare or food purchase, where cheaper alternatives may be available.  Looking at mortgage payments and other fixed costs such as loan repayments should help give you a clear idea of what you are likely to need to spend in 2011 and beyond.

 

 

The Debt Advice Group has been created to help people in serious debt get good, honest, specialist advice. It is an organisation having specialists providing debt consolidation services to write off debt.

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