Español (ESP)Grim prediction on debt - Bankruptcies likely to soar
Nottingham Evening Post
16 February 2009
The number of people seeking a drastic solution to chronic debts will increase by half this year, a Nottingham business which analyses debt has warned.
TDX group, based in City Gate, says more people are expected to have themselves declared bankrupt this year because they see no way out of their problems in the current economic climate.
The firm, which advises banks and utility companies about the best way to deal with customers struggling to pay, says the problems will get worse because increasing numbers of people will no longer be able to refinance debts.
It says it is not just the poor who will suffer, with falling property prices and tougher lending rules leaving more people in difficulty with mortgages.
Mark Onyett, who is chief executive of TDX, warned that many of the people who have serious financial worries may not know what to do.
He said: "The combined effects of economic factors, rising unemployment and the continued squeeze on household disposable income plus fewer opportunities to refinance debts or rely on equity release will push more consumers into seeking formal debt solutions and insolvency.
"Sadly, many consumers, particularly those running into debt problems for the first time, find the increasing range of debt solutions confusing.
"In our survey of consumers, 91% admitted taking the advice of the first adviser they approached. But because many advisers offer just one type of solution, consumers may not be getting the right advice for their circumstances.
"We strongly advise them to shop around for help and to approach firms who can be trusted to provide a broad range of advice."
TDX says increasing difficulties refinancing debts will see a dramatic shift in the way distressed debtors seek to resolve their financial difficulties.
The combined effect of lower property prices and tighter lending criteria by the banks and building societies will mean fewer refinancing solutions – such as remortgaging and homeowner loans – forcing more people into formal debt solutions such as debt management plans or individual voluntary arrangements.
The company says it has seen a marked trend of lower disposable incomes in people experiencing financial difficulties, which means an increasing number of debtors will find they don't have enough spare cash to qualify for a formal debt solution – leaving them with no option other than to resort to bankruptcy or the new Debt Relief Order (DRO).
Debt Relief Orders (DROs) will come into effect in April as a cheaper and simpler alternative to bankruptcy. They are aimed at people with lower levels of debt – typically less than £15,000.
