Rising unemployment and falling property values have resulted in a record high in the number of people being declared insolvent in England and Wales. There were 35,242 personal insolvencies between July and September 2009. This is an increase of over 28% compared to the same period of 2008 and most industry commentators predict that the figures will continue to increase.
While there are currently no official figures released for Debt Management Plans (something which The Association of Business Recovery Professionals is lobbying to change), it is believed that the number of plans that are failing is increasing and this is our experience at Turpin Barker Armstrong. We find that plans are successful while the creditors agree to waive adding interest and charges to the amounts owed. However we find that creditors generally agree to this for only twelve months and the plan may run into difficulty thereafter. We believe that this is partly the cause of the record number of individual voluntary arrangements being entered into and the increased take up of Debt Relief Orders.
Debt Relief Orders were introduced in April 2009. Around 2,000 Orders were made in the first three months and this more than doubled to 4,500 in the following three months. The intention is to deal with individuals who have relatively low liabilities (less than £15,000), few assets (less than £300) and little surplus income to pay their creditors (less than £50 per month). Debt Relief Orders were introduced to deal with people in the situations described above and who cannot afford to petition for their own bankruptcy.
Debt Relief Orders are another potential course to follow for those in financial difficulty. However, it is important to appreciate that there is no single solution to debt problems and people must seek independent advice that considers all possible solutions and selects the most appropriate course of action.
Date:26 January 2010
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