News that the Citizens Advice Bureau witnessed a 179% rise in inquiries about redundancy in the first three months of the year has prompted Payment Protection Insurance lobbyist Sara-Ann Burgess from Burgesses to review the options available to people who fall into debt because of a lost income.
She commented: “Recent statistics show more and more indebted people are opting for bankruptcy or Individual Voluntary Arrangements. A bankruptcy order may be obtained by a creditor for debts of £750 or more, or a debtor can bankrupt him or herself by filling in forms at a County Court. The debtor’s assets are sold and money distributed to the creditors, after insolvency practitioners’ fees are taken. If there’s a shortfall, it’s written off and in most cases, bankruptcy ends after one year when the slate is wiped clean.
However, bankruptcy is usually seen as a last resort as there’s a risk of losing your house, your financial downfall is made public and it will affect your ability to secure credit in the future.”
Sara-Ann continues: “IVAs, on the other hand, are more of a private matter. They allow people to settle their personal loan debts and outstanding credit card balances within a reasonable period of time with their creditors. An IVA is a legally binding contract between debtor and creditor – a payment period and amount is agreed, usually around five years and whatever the debtor can afford - and once the final payment is made, any remaining debt is legally written off. They’re organised via an insolvency practitioner and although there are cases where a property has to be remortgaged to release funds, you should at least keep your home.”
In April, the jobless total topped 2.261 million, the highest since November 1996.
Sara-Ann concluded: “With more people contacting the CAB with redundancy concerns, I would like to see more advice and guidance on PPI – it will help people tackle their debt problems before a job loss occurs and provide a support mechanism should the worst happen. I therefore believe it should top people’s ‘things to consider when reviewing finances’ list.”
