Bankruptcy advice ‘given mainly to poorer people’

The average person being advised to declare bankruptcy in the final quarter of 2010 was middle aged, on an income below the average and owing over £30,000, it has been revealed.

Data from the Consumer Credit Counselling Service (CCCS) has indicated these were all common features of people it advised to go down this route to deal with their debts, rather than taking out an individual voluntary arrangement.

An analysis of those involved showed three quarters – 17,605 were on lower pay at an average of £19,000 per year, while the typical amount owed was £31,000. However, for some it was worse than this, with one in five owing £40,000 or more.

The age factor was also notable, with 45 per cent aged 40 or more and one in ten over 60.

CCCS External Affairs Director Delroy Corinaldi stated: “Overtime bans, wage caps and forced shorter working hours are limiting the ability to maximize income. As limited income is one of the key factors determining a bankruptcy recommendation so there is likely to be a further rise this year.”

However, this may at the same time indicate the sort of people who may be able to take the lesser step of an individual voluntary arrangement, with this being something people can do if they have debts of £15,000.

Those who are younger may benefit from this as the arrangement lasts no longer than five years, while those on middle incomes may be better able to maintain the payments.

Insolvency Service figures revealed the quarter the CCCS survey covered was the first ever in which more people opted for an IVA than bankruptcy.