Debt & Bankruptcy Issues in the UK

Women seemed to be hit harder by the prospect of bankruptcy according to a study by the Consumer Credit Counselling Service(CCCS).

According to CCCS figures, women account for 61% of the people seeking debt advice in the UK and who are advised to go bankrupt and three quarters of them are single. The problem is that over half of the women recommended to file for bankruptcy refuse to do so because they are ashamed by the prospect of being bankrupt. The CCCS say that their refusal to cross the line and declare themselves bankrupt is adding to their debt problems as well as straining their relationships with their family members. Others choose to take out an IVA rather than face bankruptcy.

The CCCS report that many of these women find themselves in a debt crisis after a break-up, illness or job loss, but that there are others who have overspent on credit cards for clothes and holidays and can't afford to pay back their unsecured borrowing.

The CCCS reported that the average level of debt faced by people who were recommended to go bankrupt was over £30,000, most of that as unsecured borrowing in the form of credit cards, loans or overdrafts. The same group of people had an average income of £10,000 a year - and many couldn't afford the £475 needed to file for bankruptcy.

According to a recent report by accountants Grant Thornton, some 10,000 people in the UK have overspent during the Christmas period and face the prospect of insolvency or bankruptcy.

Grant Thornton predict that some 30,000 people will face insolvency during the first three months, 10,000 of these having pushed themselves over the edge by running up debts in the period before Christmas. Mike Gerrard, Head of Grant Thornton's personal insolvency practice said; "Since last Christmas, several developments such as interest rate rises, sky high utility bills and increases in unemployment, have contributed to pushing more people into financial trouble".

Other figures from the Bank of England suggest that nearly 8% of homeowners with a Mortgage are struggling to meet their debt repayments after recent rate hikes, utility prices increases and other inflationary pressures.

Christmas spending was generally higher in 2006 than in the previous year, despite the pressures on many UK households due to a diminished disposable income.

Grant Thornton suggested that many individuals used credit cards to fund their festive spending, rather than tightening their belts, and could find themselves with severe debt problems or even face bankruptcy.

The days of rate tarts may be numbered as free balance transfers become a thing of the past.

Increasingly UK credit card providers are charging consumers for transferring a balance from one card to another.

The amount that is being charged for balance transfers is rising as well, according to recent research by Moneyexpert.com.

Customers can now be charged up to £300 for transferring their balance.
MoneyExpert chief executive Sean Gardner said: "Playing your cards right is becoming more and more difficult as credit card providers raise the stakes on balance transfers.

"The days of easy credit and companies falling over themselves to allow customers to switch between cards are over. Rate tarts are being forced to raise their game as providers take a tougher line."

Looking for a long-term low rate on balance transfers can end up being a better option that constantly switching, Mr Gardner added.

Fees for balance transfers now run as high as three per cent, with the average fee currently standing at 2.1 per cent.

Meanwhile, it has been discovered that two out of five Brits carry a credit card which does not garner them or any charity any cash.

A full 86 per cent of UK credit card users said that they wanted to do more for charity, according to a survey carried out by American Express.