The truth about bankruptcy
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Wondering how many people go bankrupt? We tell all.
You may have seen in The Guardian recently that the number of people needing to become bankrupt is at a 15-year low. This is good news, as the financial crisis we’re just recovering from saw a rise in the number of people needing to go bankrupt, as you would expect.
Unfortunately, there was also a demonstration of the North-South divide as just one person in the City of London was made bankrupt in 2014 compared to Blackpool which saw 101 people become bankrupt.
Now part of the reason for the falling numbers is that people are becoming more aware of the other options they have to deal with their debts, like Individual Voluntary Arrangements (IVAs) and Debt Relief Order (DROs.)
This again is good news as it means that people are becoming more informed about the different solutions available to them and so stand a better chance of choosing the one which is best for them.
Could the numbers start to rise again?
Well it’s possible that the number could go up again. The Guardian does go on to say that debt advisors are warning that rising interest rates and also the changes in tax credits may mean that more people are being forced to go insolvent, though of course this is not certain. Let’s have a look at what those changes are to see what’s so concerning.
Changes in interest rates?
So what has happened to the interest rates that might affect people? Well one of the effects of the financial crisis was that the bank of England lowered interest rates to help people afford their borrowing – it currently stands at 0.5.
That meant that people were paying less for their borrowing but savers were getting less on their nest-eggs. The economy has seen a recovery since then and the Bank of England has warned people that they will start to bring the rate back up – slowly, but it will happen.
This means that if you have a mortgage or a loan (and you’re not on a fixed rate) then you could see your payments increase. This is why it’s so important to know what you can afford when you borrow and how you’d cope if interest rates went up.
Changes in tax credits?
Tax credits are benefits that are available to families on low incomes and the latest budget announced by the Government did see some changes in who would be able to get these and how much they would get. For instance, child tax credits won’t be available for the third child in a family (unless you’ve been claiming the benefit for them for six months straight already.)
If you’re worried about these changes then have a look at the Government website for the details of the changes.
I’m in trouble… do I need to go bankrupt?
It’s a good thing that people are not needing to become bankrupt at the rate they used to be and also that they are becoming more aware of the other options available to them to deal with serious debt. Having said that, bankruptcy is sometimes the right option for certain circumstances so just because the numbers are on the decrease doesn’t mean that bankruptcy has stopped working as a solution. Whether or not it’s the right thing for you just depends entirely on your situation.
If you’re struggling with problem debt then we want to make sure that you get the right information about these different solutions so make sure that you look at the rest of the site and the pages we have on each one. If you have any questions make sure to contact one of our debt experts using the option to the left of the page.
by Christine WalshBack to blog home