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As you might know, I regularly appear on the LBC Money Hour Show with Clive Bull and I must say that my most recent show on June 15th is one that I will not forget! We heard from a few callers with varied levels of debt and different circumstances.

Hearing about how people fell into debt, how it has affected their lives and being able to offer a little guidance and hope to their situation is the real driving force behind why I do what I do.

Call 1 – Advice to help face debt

Darren was my first caller on the show and he told me how his debt levels spiralled out of control to the point that he no longer knew how much he owed and is now sleeping on a friends' sofa because his parents live out of the country and he has nowhere else to go. He admitted that he was simply 'running away from his debts' and it was obvious that it was really getting Darren down and affecting his mental health.

Read more: LBC Money Hour Show with Clive Bull 15 June 2015

 

No one is perfect. Anyone of us could make a bad financial decision during our lifetime, but what if it leads to personal bankruptcy, is this so heinous that we have to keep it from our loved ones?

I have had numerous calls from people that have posed that very question, do I need to come clean about my bankruptcy or can I just forget it?

So what can be that damaging? You don’t have a criminal record, and okay, you may have had bouts of unemployment, most of us have from time to time but you are now working full time. So what can be wrong?

Read more: Should I tell my fiancée that I'm an ex-bankrupt?

 

093-bankrupt-businessman

Is it so surprising that bankruptcy numbers are down again? Is it because fewer people are running into trouble? In my book the answer to both questions is no.

As noted in my article from 2012 with the Daily Mirror ‘The people that are too poor to go bankrupt’ based on research completed at that time reveals that nearly half of those for whom bankruptcy is the only option are simply too poor and do not have the money to pursue it.

Bankruptcy numbers fall after the 2010 increase in fees

The cost for a consumer to petition their own bankruptcy has increased by 37% since June 2010 and in England and Wales currently stands at £705 per individual.

See from the table below that in 2009 (the year before the increase in fees) the number of those going bankrupt was near the 75,000 mark and that the number for 2014 has dropped to just over 20,000. 

Read more: Should we be doing more to help those that cannot afford the cost to go bankrupt?

 

With the spike in the numbers of borrowers receiving a County Court Judgement (CCJ), 698,166 in England and Wales in 2014, 30 per cent more than in 2013 and the highest number in any year since 2009, consumers need to be aware that any unsecured debt such as a credit or store card debt, a personal or payday loan, an overdraft or even a catalogue debt, can, if you own your own home, end up as a secured debt, just like your mortgage.

Fall behind with any of the above debts and the debt including interest is £1,000 or more then under new rules issued on 1 October 2012 the unsecured lender can easily apply to the court to put these debts on your house, a bit like a second mortgage and, at the same time, apply for a County Court Judgement (CCJ).

What the new rules mean

Read more: As CCJs surge should I be worried about a credit card debt if I’m a house owner? Err, yes!

 

It’s heartening to see that The Insolvency Service consultation with the debt management industry has been rewarded with improvements to the working of Debt Relief Orders (DROs) with the key changes being increasing the maximum amount of unsecured debt that can be included in a DRO from £15,000 to £20,000. Although many debt counsellors have been calling for a maximum level of £30,000 this is a start and welcomed news as this move alone is expected to enable an additional 3,600 more people access to the debt remedy instead of the more arduous bankruptcy process.

Read more: Good news with the proposed DRO reforms, but they still have one major fault

 

In 2009 74,670 consumers were made bankrupt, the figures for 2013 reveal a huge drop down to 24,536 and they are still falling for this year. The reason in my view is simple: with the Official Receiver’s (ORs) fee at £525 and the court fee of £180, totalling £705 people can’t afford the extortionately high costs involved in going bankrupt.

The increasing cost to go bankrupt - up 40% since 2010

The cost for a consumer to petition their own bankruptcy has increased 40% since June 2010 and now stands at £705 per individual. Note the table below, bankruptcies in 2013 were a third of the 2009 figure. My prediction for 2014 is a continuing fall to just 21,000 bankruptcy cases.

Read more: Are you being conned with the latest fall in consumer bankruptcy figures?

 

Research just released by Shelter  shows that parents give their children on average £23,000 each to help with a deposit to buy a house. See the full Shelter press release here

This is fine but what concerns me is what steps have the parents taken to protect their donation, gift or investment? The bottom line is that if the home is purchased in joint names and the relationship breaks up where does that leave the contribution made by the parents? How do they propose to get the money back that they had perhaps put aside for retirement or elderly care? Or have they actually given the money away with the knowledge that they will never see it again?

These are difficult questions that parents need to face and I know, I’ve been there!

Read more: How parents who give on average 23k to help their children buy a home could be at risk of losing...

 

The CML have just released new data on the number of UK homes being repossessed and are now looking at around 24,000 homes for this year. At 11,800, the number of cases of possession in the first half of this year was at its lowest since the second half of 2006. So great news, or is?

The figures issued by the Council of Mortgage Lenders (CML), in my view, do not offer a true reflection of current market conditions because;

Read more: So it’s all okay with the houses repossession market, or is it?

 

Exactly what is a DRO?

The DRO was introduced to help the least complicated debt cases be discharged on a fast-track through the court system with no personal appearance at court required. Happily, from next year, the standard consumer bankruptcy will no longer need to be going there either.

A DRO is designed to provide a fresh start for the most vulnerable people trapped in debt. Currently however, because of the ridiculously low qualifying criteria set some 10 years ago where a debtor’s unsecured debts are below £15,000, disposable income is less than £50 per month, they are NOT a house owner, even in negative equity and assets are valued less than £300!!!, it is only really appropriate for the unemployed, those unable to work and on long term benefits.

Come on, get real, most people will have assets easily over the £300 threshold. A newish mobile phone, which everyone seems to have now no matter what their income or level of debt, can be worth at least £100 on trade-in.

Read more: So at last the government are to review Debt Relief Orders (DROs)!

 

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