Abacus Daily Debt News

The number of individual voluntary arrangements (IVAs) taken out by consumers struggling with debt remained almost exactly the same in the final quarter of 2011 as it did in the previous three months.

Insolvency Service figures showed 13,047 IVAs were agreed in the period, just one less than in the three months to September.

Yet at the same time, the number of individual bankruptcies and overall insolvencies fell, with the total number of people in England and Wales declaring insolvency of one form or another dropping from 30,219 to 28,973.

It was the third successive quarter in which there were more IVAs than individual bankruptcies, suggesting it is becoming the method of choice for most people in deep financial trouble to tackle the problem.

Discussing the figures, chief executive of the Money Advice Trust Joanna Elson said: "I would caution against considering this fall in personal insolvency as completely good news," arguing that the decline could be because the cost in fees of going bankrupt is the main reason for less of these taking place.

By James Francis

Many consumers could still be seeking individual voluntary arrangements (IVAs) as new figures show hundreds of personal insolvencies are occurring daily.

Data supplied by Credit Action has indicated 331 people are made insolvent or bankrupt each day, showing that the problems of unpayable debt are still affecting large numbers of people.

Indeed, the statistics showed Citizens Advice deal with 8,652 new debt queries each day.

An IVA can help those with over £15,000 of debt and can be implemented as long as three quarters of the creditors agree to the deal, which will involve them accepting reduced payments.

This partial debt cancellation may account for much of the £15.68 million of loans banks and building societies write off every day.

According to the most recent data available from the Insolvency Service, which cover the third quarter of 2011, IVAs were preferred to bankruptcies as a form of insolvency.

During this period, there were 13,048 IVAs and 9,567 individual bankruptcy orders.

By Amy White
 

An increasing number of consumers are in debt to water companies as they fall behind with bills, new research has found.

The Money Advice Trust has revealed its National Debtline took 32 per cent more calls on this particular issue in 2011 (16,226) than it did in 2010 (12,267), with the overall figure having grown by 432 per cent since 2006.

It means that nearly ten per cent of those contacting the line seeking help have water bill problems.

Commenting on the situation, chief executive of the Trust Joanna Elson said: "The sobering fact is that paying water bills is becoming increasingly difficult for many households across the country and it doesn't seem to be a problem that will go away any time soon."

The figures were published in the wake of this week's announcement by water regulator Ofwat that prices will rise by an average of 5.7 per cent this year.

Ofwat acknowledged that the actual level of increase will vary depending on location, the services received and whether homes have a meter.

The highest average increase will be for Southern Water customers, who face paying an extra 8.2 per cent.

By James Francis
 

Consumers have been advised that they should take any opportunity they have to cut down their debt levels ahead of any increase in interest rates.

Commenting on the issue, managing director at moneymaxim.co.uk Mark Bower said: "For those who do have savings we are recommending they consider reducing their current borrowing levels ahead of any interest rate increase."

One very good reason to do this is because the level of return on savings is very scant at the moment, he noted.

Such a measure could ensure those whose repayments will rise when the base rate finally does increase will have less left to pay because of a pre-emptive move to trim what they owe.

There may be little sign of a base rate increase yet, however, with inflation falling in recent months and all nine members of the Monetary Policy Committee voting to hold the base rate at 0.5 per cent last month.

By Amy White

Millions of mortgage holders are saving up any spare cash they have, instead of using it to pay off their mortgages early.

This was the finding of a survey by First Direct, which revealed 42 per cent of mortgage holders are saving regularly, while just 21 per cent are paying extra off their home loans.

And the study showed a quarter of homeowners are not aware of whether or not they can make overpayments on their mortgage, while 42 per cent do not know what the limit is that they can overpay by.

Some may be paying more debt interest than is necessary as a result, while earning low sums on their savings due to the current record low base rate.

Overpayments may help some consumers who could find they are ahead and therefore have more leeway when seeking help from their lender if they run into financial trouble, such as redundancy.

A recent study by Moneysupermarket.com found11 per cent of Britons are worried about their ability to pay off their debts at present. 

By Joe White
 

Not being able to pay off debts is one of the top financial fears facing Brits this year, according to new research from MoneySupermarket.

The price comparison site discovered 11 per cent of respondents to its survey are concerned about debt repayment, meaning it is a greater concern than rising transport costs (seven per cent), no pay rise or bonus (seven per cent) and the inability to cover monthly rent and mortgage costs (four per cent).

Some 43 per cent of consumers cited rising utility bills as their biggest worry, placing this issue top of the list, while increasing food and petrol charges came in second and third places with 34 per cent and 33 per cent respectively.

Clare Francis, consumer finance expert at MoneySupermarket, said: "With uncertainty in the jobs market and household expenditure still high, it is important to have money to fall back on should your circumstances change."

The news comes in the same week Prudential revealed almost one-fifth of Brits will retire in debt during 2012.

By Joe White

The controversial plan to cap benefits has been defeated in the House of Lords but the government has vowed to fight on in attempting to get the legislation approved.

A bishop's amendment that child benefits should not be included in the £26,000 per year cap was supported by crossbench, Labour and Liberal Democrat peers by 252 votes to 237.

Gillian Guy, chief executive at national charity Citizens Advice, warned that if the bill passes it will have a "disproportionate impact" on some of the country's most vulnerable families.

If such a comment is justified, it may particularly impact on those struggling with debt.

Children, breadwinners who have lost their jobs and people who cannot work due to illness are among those who would be hit by the proposed cap, she said.

Ms Guy acknowledged the coalition is right to attempt to simplify the "complex" benefits system, but stressed certain safeguards must be put in place.

Without these, she warned: "The combined impact of these sweeping welfare reforms and huge cuts will be catastrophic for a lot of families already stretched to the limit."

By Amy White

Homeowners struggling to pay off debt and potentially facing difficulties with their mortgage repayments might be left facing further financial strain as home insurance premiums increase this year.

Such a development has been predicted by John Portwood, personal lines insurance broker at Portwood & Co.

He said upgrading in line with inflation will be one cause of the increase, but said the economic downturn may also have the effect of pushing premiums up.

"With the recession there are probably more fraudulent insurance applications - especially over the internet - and claims," Mr Portwood stated, noting insurers will have to factor this in due to the extra costs such actions incur.

However, the broker noted, people need to remember their home is "their largest single investment" and that the cost of insurance is less important than ensuring they are covered for major problems.

Recent research by Confused.com indicated motorists were most likely to face substantial increases in car insurance costs if they lived in the north of England last year, with Bradford seeing the highest average premium rise at 17.1 per cent.

By James Francis

UK unemployment has risen again, which could leave many more people struggling to pay off their credit card debts and other borrowing.

Official figures published today (January 18th) by the Office for National Statistics have revealed the number out of work rose by 118,000 in the three months to November 2011, increasing from 8.1 per cent of the working population to 8.4 per cent, or 2.68 million.

This was the highest level of joblessness since the mid-1990s and the headline figure may be just one sign of the problems consumers face.

Another issue is that while the number in full-time work fell by 57,000, the total in part-time jobs rose, which could mean many are not unemployed but are working less and therefore have a smaller income with which to pay their bills - including debt repayments.

Those shedding jobs in the months ahead could include small firms, with a poll by the Federation of Small Businesses published this week showing 6.5 per cent of them expect to lay staff off in 2012.

By James Francis

Concern has been raised over how much regulation of overdraft debt is being imposed on banks, as a new authority takes over the role of keeping financial institutions in line.

Consumer group Which? has said a key issue is that unauthorised overdraft charges are too complicated for people to be able to compare between those implemented by different banks.

It noted that its sample group - including a maths PHD student - were only able to correctly calculate the figure on seven out of 48 occasions when presented with bank statements.

Launching its "Watchdog not Lapdog" campaign, Which? called for the new Financial Conduct Authority to crack down on banks and rule against such complexity.

Which? Chairman Peter Vicary-Smith said the government has so far failed in its pledge to tackle this issue, commenting: "It's extremely disappointing to find that bank charges are still too high, too complex and impossible to compare."

Responding to the call by Which?, the British Bankers Association argued that most consumers do not go into unauthorised overdrafts anyway, adding that its members allow more buffer zones at the limits of overdrafts and often contact customers when the balance is close to the line.

By Amy White