Students Considering Bankruptcy

Students heading for colleges and universities are already considering bankruptcy as an option should they find themselves in too much debt.

According to Equifax, the credit reference agency, 11% of respondents would take the bankruptcy route should they find themselves in financial difficulty.

What students are possibly not considering are the serious restrictions that bankruptcy brings.

Bankruptcy not only affects your credit status for 6 years, but also restricts where you are able to work.

Many financial and law firms will not employ someone who is bankrupt and if this is an area of study, then bankruptcy will not be an option should a financial problem occur.

Read more information on Bankruptcy

Filed Under  Budgeting, Debt News  |  Leave a Comment

Buckling Under Debt

One person in every five in England and Wales is said to be buckling under a mountain of debt, a trend helped along by rises in the cost of borrowing.

Insolvencies in England and Wales rose 66.3 percent in the 3 months leading up to June and court orders for home repossession jumped by a 5th.

Mark Sands, director of personal insolvency of financial consultants KPMG said:

Given that consumers are now facing higher fuel and heating costs as well as heftier council tax bills, we forecast that the stress on those in debt is likely to increase. This week’s rise in interest rates will place added pressure on those already on the brink.

With mortgage rates on the rise, homeowners are feeling the pressure meeting their financial obligations and thousands who have secured borrowings on their property are facing the prospect of loosing their homes due to house repossession orders.

Britain’s banks are blaming the change in the Bankruptcy Law, which they claim have caused a surge in bad debt charges in their financial year. They say the changes in The Enterprise Act 2002 made it easier for people to declare themselves bankrupt, which resulted in larger amounts of debts being written off.

Banks are also saying that people opting for Individual Voluntary Arrangements have played their part:

Individual voluntary arrangements, in particular, have had a huge impact on the numbers,” said Les Manning, a consultant at Deloitte. “IVA’s are the acceptable face of personal insolvency.

However, there has been a drop in the number of personal bankruptcies, so this does at least offer some ray of hope as more people are choosing the IVA route rather than going bankrupt.

Source: Reuters

Filed Under  Debt News  |  Leave a Comment

The Debt Bubble

Up and down the country we are hearing about rises in petrol costs, banks pushing up their lending costs, increased council tax prices and energy bills.

This is cause for concern for consumers.

Wage rises are restrained to 3.8% so do not counteract the pressure of inflation.

Banks believe they needed to increase their lending costs and bank charges to keep up with the rising costs of covering bad debts. They have also declared that they are tightening the reigns regarding their lending criteria. However, Vince Cable, the Lib Dems Treasury Spokesman, blames banks lending practices for the rise in insolvencies.

‘There is currently a considerable degree of irresponsible lending and aggressive marketing to individuals of personal loans and credit. Lenders have an obligation to stop these practices and provide greater levels of debt advice.’ ‘With interest rates rising last Thursday, families are likely to feel a further pinch on their budgets, leading to further increases in individual insolvencies.’

I partly agree with Vince Cable, but it isn’t high street banks alone.

People have access to numerous companies who hold consumer credit licences, which authorise them to lend you money.

It is currently up to that individual company to determine the criteria which will decide whether they believe you meet their requirements to lend you money. Some creditors will consider your income to decide what they will lend you without taking into consideration other financial commitments and whether you would still be able to repay your debt should an unforeseen event happen.

Figures from the DTI released on Friday, showed a record 26k people became insolvent in England and Wales during the second quarter of the year - a 66% increase in the same period in 2005. Mark Sands, director of personal insolvency at KPMG stated

‘We calculate that someone is entering insolvency every minute of the court’s working day”

Rises in Mortgage rates are also causing repayment difficulties for families. House repossessions are at their highest since 2001. CML director-general Michael Coogan said that the rise in interest rates last Thursday would add to payment difficulties for hard-pressed mortgage borrowers.

Although it is looking like things are going to get worse before they get better, James Eden, banking analyst with Dresdner Klienwort believes that things will improve by 2008. He believes this is due to banks tightening up their lending criteria. If banks become more choosy about who they lend money to, then things may filter to other companies whom may follow suit.

Filed Under  Debt News  |  Leave a Comment