The UK might be heading for a double-dip recession, which means that more people – already highly geared before the economic troubles started – are going to have to face the issue of bad credit.

A number of organisations, including Citizens Advice, are warning that the start to the new decade and for many years to come, is going to be marked by people with bad credit problems.

And to reinforce the gloomy picture, the Insolvency Service has released figures which point to a record number of Individual Voluntary Arrangements being entered into in the second quarter of the year.

The IVA Advisory Centre said that nearly 14,000 people had entered into an IVA between April and June in England and Wales. This represents a 14% increase on the previous quarter. But apart from the implications of the increase, is the fact that the level of IVAs is at an all time high. The previous ‘record’ was 13,219 entering into an Individual Voluntary Arrangement, which was reached in the last three months of 2009.

What’s more, there has been a record number of people entering a Debt Relief Order. Some 6,295 chose that route as their best way out of their financial difficulties. Ironically, say the IVA Advisory Centre, the rises in both of these types of debt agreement, has meant that people entering bankruptcy is at an all-time low since the final three months of 2007. The number of people declaring themselves bankrupt in the second quarter of the year is 14,982, some 20% down.

An IVA Advisory Centre spokesman said:
“What’s particularly noticeable now is the similarity between the number of bankruptcies and the number of IVAs. With this drop in bankruptcy numbers and the increase in IVAs, bankruptcies in Q2 outnumbered IVAs by around 1,500 (or 11%) – far less than we’ve ever seen before.

"In the first quarter of the year, for example, there were around 6,500 more bankruptcies than IVAs. At the start of last year, there were more than two new bankruptcy cases for every new IVA. Before 2005, bankruptcies tended to outnumber IVAs by a ratio of 3:1 or more.”

The IVA Advisory Centre explain this trend by pointing to a great awareness of having a choice other than bankruptcy. The spokesman continued:
“How can we explain this trend? To a significant extent, it’s due to a greater awareness of the alternatives to bankruptcy. DROs have already helped thousands who simply couldn’t afford to enter bankruptcy and couldn’t commit to the payments which most IVAs require. And IVAs have provided many borrowers with a way to enter insolvency that avoids some of the potential drawbacks of bankruptcy, such as losing their home.

“Bankruptcy may still be the best option for many of today’s struggling borrowers, but these figures clearly show that more and more are finding an IVA or DRO provides the help they need in a way that better suits their individual circumstances.”

And the IVA Advisory Centre warn all those facing the prospect of bad credit and mounting debts, to contact an expert as soon as possible. Delay causes greater problems they warn and seeking professional advice quickly, creates better options for those facing problems.

Guest Article by Neil Camp

Fergie might be in need of debt consolidation if a recent story in The Sunday Telegraph is to be believed which says that The Duchess of York might have to declare personal bankruptcy.

The newspaper reported that while some officials think that declaring bankruptcy is the best option for Fergie, her ex-husband, The Duke of York, is trying to draw-up a rescue plan, which could include something like a debt consolidation plan.

It’s said that The Duchess of York has debts totalling five million pounds and her financial situation has not only alarmed the Queen and the rest of the Royal Family, but also that it has been discussed with the Prime Minister, David Cameron.

What makes the situation tricky say independent observers, is that up to now, no senior member of the Royal Family has been made bankrupt and if Fergie does decide to fall on her sword, it will be an unwelcome shock wave through the British establishment.

And The Duke of York will feel the embarrassment most keenly, especially as he is the UK’s Special Representative for International Trade and Development.

As to the figure of five million pounds, it is understood that the debts are split almost equally between UK and US creditors. The interest continues to accrue on the debts and is reckoned to amount to several thousands of pounds every month. But currently Fergie has no real income to cover the payments.

The Duchess of York has suffered a number of recent setbacks, including a major gaffe when she was filmed by the News of the World allegedly selling access to her ex-husband for half a million pounds. Everyone involved in the incident has made it clear that the Duke had no knowledge of his wife’s dealings to sell quality time with him.

Indeed, the Duke of York is said to have personally settled some of his former wife’s debts and obligations.

Inside sources say that Fergie built up the debts through a lack of understanding about money. Not only has she been incredibly generous with friends and colleagues, but she has also been using expensive lawyers both in the UK and the US. She is said to have not fully appreciated the amount of fees that legal teams can charge for advice.

The 50-year-old Fergie has been in this situation once before, having amassed debts of just over £4 million in the mid 1990s. On that occasion she went to America and earnt millions to repay what she owed. She became an ambassador for a weight loss company and also published her autobiography.

Experts reckon she can’t pull the same trick twice though, as her earning power has dipped in the US, where she is no longer seen as a credible character.

Debt consolidation might just be one of the tactics Fergie might use to stave off bankruptcy.

Guest Article by Neil Camp