Accountancy Firm PKF has predicted that over 400 Scottish residents will go bankrupt every week in 2012 due to the continuing poor economics.
Sequestration (the Scottish term for bankruptcy) the firm predict that over 20,000 Scots will have entered this or a Protected Trust Deed (PTD) by the end of 2011 and that figure will continue to rise throughout 2012.
PKF predict a rise due to further cuts on the household budget; public sector cut backs, hours being cut and wages being frozen and no sign of an upturn in the economy.
The firm also warned that any increase in the base rate of interest would cause an alarming increase in the amount of homeowners going bankrupt.
A spokesperson for PKF said: “The dramatic rise in the number of more affluent Scots being made bankrupt is a further sign that the after effects of the recession are spreading among all sectors of society with the result that I believe all personal insolvencies will continue to rise and remain at high levels for several years to come.”
He also said since LILA came out in 2008 Scottish bankruptcies have steadily increased as many struggling Scots have taken advantage of this cheap way into bankruptcies when they have low assets and low income.
However recently these numbers have fallen and there is an increase in people entering a Protected Trust Deed .This they predict would peak in 2012 as job losses, overtime bans, no increase in wages and personnel circumstances all take their toll on the middle class in Scotland.
“People entering a Protected Trust Deed are more affluent as they have a disposable income and are able to pay something towards their debt“.
“Before the recession if these people were struggling with their debt they would release equity on the ever increasing property they owned , However nowadays property prices are stagnant and banks have a great reluctance to lend at such a volatile time“. This leaves many with little option.
Wednesday, 25 January 2012
Where To Turn When Debts Get Out Of Control
Hundreds of Scots are expected to face insolvency each week and we would like to look at their options.
As household finances continue to take a cut with more job losses and the public sector cuts more Scots than ever will be made bankrupt. If one of these could be you we recommend that you seek out your options as early on as possible this could mean there are more options available to you.
There are many reason people enter an insolvency some of which include divorce, illness, redundancy and overspending.
More and more Scots in middle incomes are entering a solution – quickest growing bankruptcy arrangements are designed for those with jobs.
If you reside in Scotland there are various options if you can no longer cope financially. The options vary depending on your own financial situation, so choosing the correct one is very important so that you should not incur any further difficulty.
Debt arrangement scheme
(DAS) this is where you commit to a debt payment plan, this allows you to repay your debt on one affordable monthly payment.
The length of time this last for varies depending on the amount of debt, and what you can reasonably pay towards it on a monthly basis.
If you are approved for a (DAS) all interest fees and charges are frozen and the creditors can take no further action against you. Your one monthly payment is taken then distributed amongst your creditors.
Protected Trust Deed
(PTDs) are on the rise, they are often used by the more affluent people with jobs and assets. This indicates that society is being affected on all levels.
A PTD allows you to repay as much as your debt as you are able with your assets, it is a formal arrangement made between you and your creditors. It lasts for approximately three years. A licensed insolvency practitioner will become the trustee and put a proposal forward to all your creditors, this will be based on all information you provide income, expenditure and level of debt, also any assets you may have.
To enter a PTD you must be able to prove you have disposable income and are able to contribute monthly something towards your debt.
It is the creditors decision as to accept your proposal and they are given five weeks to consider it. If enough creditors agree your trust deed will become protected and no creditor can take legal action to recover the debt. As long as you comply to repay the amount required within the agreed time any remaining amount will be written off.
Sequestration
The equivalent name for bankruptcy. There are two ways to enter this solution: a creditor can take you to court, if they are owed more than £3,000 this way they can raise bankruptcy proceedings against you, or for the cost of £100 you can make your own application thus avoiding any court action.
To do this yourself you must prove you are insolvent meet the Low Income, Low Assets (Lila) criteria or have a Certificate for Sequestration. Apparent insolvency will mean a creditor has started action over a debt and has served a charge for payment or a statutory demand.
After you have been awarded bankruptcy, a trustee will be appointed they will look after your insolvent estate. You will have to show all your assets and liabilities and you will have to prove your full income and expenditure. If you have assets they will be sold for your creditors; if you have any disposable income you may also be asked to make contributions. Some assets do not have to be sold for your bankruptcy and trustees have a guideline on how to deal with this.
As long as you co-operate with your trustee, you should be discharged from your bankruptcy after one year.
Low Income, Low Assets
(Low Income, Low Assets bankruptcy) Lila was introduced to help people who need debt relief but are unable to establish apparent insolvency.
It is suitable for people on very low incomes with few or no assets. In the last three years around 20,000 Scots have gone for this solution. This can provide short term relief from debt, however it stops many getting credit in the future and means for some there is no choice but to re enter bankruptcy.
Sequestration certificate
This is the newest kind of personal insolvency legislation; this was introduced for people not suitable for a Lila or a Ptd.
A Certificate for Sequestration is given by a money adviser or an insolvency practitioner, after gathering all information on an income and expenditure and receiving documentation (statements, pay slips, etc), they will certify that you are unable to pay your debt.
When you go this way into bankruptcy, you must sign the application within 30 days of signing the application pack.
Consequences
Sequestrations, PTDs and DASs all have a serious effect on your credit rating this normally lasts for up to six years.
Sequestration or a PTD should be entered as a last resort. They should not be entered lightly as they have a serious impact on your credit rating. For some with huge debt that they will never be able to clear they chose this route. Some creditors put so much pressure on people that they can suffer with stress because of their debt.
If you are having debt problems and are finding it difficult to repay your debt it is crucial that you seek debt advice as soon as possible.
As household finances continue to take a cut with more job losses and the public sector cuts more Scots than ever will be made bankrupt. If one of these could be you we recommend that you seek out your options as early on as possible this could mean there are more options available to you.
There are many reason people enter an insolvency some of which include divorce, illness, redundancy and overspending.
More and more Scots in middle incomes are entering a solution – quickest growing bankruptcy arrangements are designed for those with jobs.
If you reside in Scotland there are various options if you can no longer cope financially. The options vary depending on your own financial situation, so choosing the correct one is very important so that you should not incur any further difficulty.
Debt arrangement scheme
(DAS) this is where you commit to a debt payment plan, this allows you to repay your debt on one affordable monthly payment.
The length of time this last for varies depending on the amount of debt, and what you can reasonably pay towards it on a monthly basis.
If you are approved for a (DAS) all interest fees and charges are frozen and the creditors can take no further action against you. Your one monthly payment is taken then distributed amongst your creditors.
Protected Trust Deed
(PTDs) are on the rise, they are often used by the more affluent people with jobs and assets. This indicates that society is being affected on all levels.
A PTD allows you to repay as much as your debt as you are able with your assets, it is a formal arrangement made between you and your creditors. It lasts for approximately three years. A licensed insolvency practitioner will become the trustee and put a proposal forward to all your creditors, this will be based on all information you provide income, expenditure and level of debt, also any assets you may have.
To enter a PTD you must be able to prove you have disposable income and are able to contribute monthly something towards your debt.
It is the creditors decision as to accept your proposal and they are given five weeks to consider it. If enough creditors agree your trust deed will become protected and no creditor can take legal action to recover the debt. As long as you comply to repay the amount required within the agreed time any remaining amount will be written off.
Sequestration
The equivalent name for bankruptcy. There are two ways to enter this solution: a creditor can take you to court, if they are owed more than £3,000 this way they can raise bankruptcy proceedings against you, or for the cost of £100 you can make your own application thus avoiding any court action.
To do this yourself you must prove you are insolvent meet the Low Income, Low Assets (Lila) criteria or have a Certificate for Sequestration. Apparent insolvency will mean a creditor has started action over a debt and has served a charge for payment or a statutory demand.
After you have been awarded bankruptcy, a trustee will be appointed they will look after your insolvent estate. You will have to show all your assets and liabilities and you will have to prove your full income and expenditure. If you have assets they will be sold for your creditors; if you have any disposable income you may also be asked to make contributions. Some assets do not have to be sold for your bankruptcy and trustees have a guideline on how to deal with this.
As long as you co-operate with your trustee, you should be discharged from your bankruptcy after one year.
Low Income, Low Assets
(Low Income, Low Assets bankruptcy) Lila was introduced to help people who need debt relief but are unable to establish apparent insolvency.
It is suitable for people on very low incomes with few or no assets. In the last three years around 20,000 Scots have gone for this solution. This can provide short term relief from debt, however it stops many getting credit in the future and means for some there is no choice but to re enter bankruptcy.
Sequestration certificate
This is the newest kind of personal insolvency legislation; this was introduced for people not suitable for a Lila or a Ptd.
A Certificate for Sequestration is given by a money adviser or an insolvency practitioner, after gathering all information on an income and expenditure and receiving documentation (statements, pay slips, etc), they will certify that you are unable to pay your debt.
When you go this way into bankruptcy, you must sign the application within 30 days of signing the application pack.
Consequences
Sequestrations, PTDs and DASs all have a serious effect on your credit rating this normally lasts for up to six years.
Sequestration or a PTD should be entered as a last resort. They should not be entered lightly as they have a serious impact on your credit rating. For some with huge debt that they will never be able to clear they chose this route. Some creditors put so much pressure on people that they can suffer with stress because of their debt.
If you are having debt problems and are finding it difficult to repay your debt it is crucial that you seek debt advice as soon as possible.
December UK inflation rate falls to 4.2%
At long last there was some good news for the Bank of England to reinforce its forecast that inflation would fall back sharply in 2012. The main reason for the 0.6% drop from Novembers 4.8% figure was due to reductions at the fuel pump and high street clothing companies discounting their goods in order to woe customers. The downward trend has continued since its 3 year high of 5.2% in September 2011.
Whilst inflation is still above the Bank of England’s target of 2% inflation they will be reassured that inflation will be below their target rate by the end of 2012,with the continued downturn in the economy forcing prices to be kept in check supported by reducing energy prices.
With the probability that energy suppliers will continue to reduce their prices for electricity and gas this should help in the war against inflation ,adding support to the Bank of England’s Monetary Policy Committee’s to continue with its policy of quantitative easing asset purchases.
The Office of National Statistics who released the data said that December’s reduction to a six month low was attributed to a reversal in factors that forced up inflation in 2010.
Surprisingly The Office for National Statistics revealed that there was little evidence to show supermarkets heavily discounting food in December, however the cost of alcohol had a record monthly drop.
Analyst for Jefferies International, Marchel Alexandrovich said “The figure was bang in line with expectations. This is a beginning of a downward trend that will see inflation fall back towards 3% by springtime as the VAT rise drops out and energy prices fall.
He continued: "The inflation back drop will improve going forward which will make it easier for the Bank of England to do more quantitative easing in the next couple of months.
Debt Help Solutions
Debt help solutions for people in debt includes a debt management plan, trust deed or for people with serious debt problems an IVA.
Whilst inflation is still above the Bank of England’s target of 2% inflation they will be reassured that inflation will be below their target rate by the end of 2012,with the continued downturn in the economy forcing prices to be kept in check supported by reducing energy prices.
With the probability that energy suppliers will continue to reduce their prices for electricity and gas this should help in the war against inflation ,adding support to the Bank of England’s Monetary Policy Committee’s to continue with its policy of quantitative easing asset purchases.
The Office of National Statistics who released the data said that December’s reduction to a six month low was attributed to a reversal in factors that forced up inflation in 2010.
Surprisingly The Office for National Statistics revealed that there was little evidence to show supermarkets heavily discounting food in December, however the cost of alcohol had a record monthly drop.
Analyst for Jefferies International, Marchel Alexandrovich said “The figure was bang in line with expectations. This is a beginning of a downward trend that will see inflation fall back towards 3% by springtime as the VAT rise drops out and energy prices fall.
He continued: "The inflation back drop will improve going forward which will make it easier for the Bank of England to do more quantitative easing in the next couple of months.
Debt Help Solutions
Debt help solutions for people in debt includes a debt management plan, trust deed or for people with serious debt problems an IVA.
Financial advisor jailed
Ryan Burnside, 35, has been jailed for a period of 2 years and 4 months for defrauding grandmother, Margaret Gallivan of her life savings using the pretext he was investing the money in a Lithuanian bank according to the Stirling Observer.
The Financial Services Authority (FSA) had banned Burnside working as a financial advisor prior to him obtaining £150,000 by fraud.
While Mrs Gallivan believed her money was being wisely invested the reality was Burnside was spending the money feeding his gambling addiction in casinos.
Whilst working for Investment firm Albannach in 2008, he was assigned Mrs Gallivan as a client of the firm. However Burnside was dismissed shortly after by Albannach and was no longer eligible for registration with the FSA, despite this he purported to still be employed in a financial advice capacity.
In order to alert people to the fact that Burnside was no longer authorised under the Financial Services and Markets Act 2000 a statement was released by the body in August 2010 to that effect. Unfortunately for Mrs Gallivan, she was unaware of this and was conned into giving Burnside more cash as Burnside told her some of her initial investments were under performing.
Mrs Gallivants reported Burnside after her son discovered he was no longer registered with the FSA to give financial advice. Burnside was subsequently arrested where he pled guilty to obtaining 150,000 by fraud whilst pretending to be a financial advisor.
At court, solicitor Frazer McCready explained, although Burnside had previously enjoyed a basic salary of approximately £75,000 per annum he had accrued debts of £40,000 after starting to gamble in 2005.
As noted in the Stirling Observer, Sheriff William Gilchrist told Burnside: “This was a gross breach of trust. Imprisonment is inevitable and the only issue is the duration. I have taken account of the amount, which was substantial , the period over which this offence was committed and the effect on the victim who has effectively been defrauded of her savings.”
The Financial Services Authority (FSA) had banned Burnside working as a financial advisor prior to him obtaining £150,000 by fraud.
While Mrs Gallivan believed her money was being wisely invested the reality was Burnside was spending the money feeding his gambling addiction in casinos.
Whilst working for Investment firm Albannach in 2008, he was assigned Mrs Gallivan as a client of the firm. However Burnside was dismissed shortly after by Albannach and was no longer eligible for registration with the FSA, despite this he purported to still be employed in a financial advice capacity.
In order to alert people to the fact that Burnside was no longer authorised under the Financial Services and Markets Act 2000 a statement was released by the body in August 2010 to that effect. Unfortunately for Mrs Gallivan, she was unaware of this and was conned into giving Burnside more cash as Burnside told her some of her initial investments were under performing.
Mrs Gallivants reported Burnside after her son discovered he was no longer registered with the FSA to give financial advice. Burnside was subsequently arrested where he pled guilty to obtaining 150,000 by fraud whilst pretending to be a financial advisor.
At court, solicitor Frazer McCready explained, although Burnside had previously enjoyed a basic salary of approximately £75,000 per annum he had accrued debts of £40,000 after starting to gamble in 2005.
As noted in the Stirling Observer, Sheriff William Gilchrist told Burnside: “This was a gross breach of trust. Imprisonment is inevitable and the only issue is the duration. I have taken account of the amount, which was substantial , the period over which this offence was committed and the effect on the victim who has effectively been defrauded of her savings.”
Friday, 13 January 2012
Jeremy Hunt admits Government is reviewing cut in child benefit
The Culture Secretary Jeremy Hunt stated the government was looking at ways to make unpopular plans surrounding the cut in child benefit fairer. However the treasury have commented there has been no change in policy at this stage.
David Cameron has admitted there was an issue with the proposed thresholds in the wake of increased criticism that single earning families were being unfairly hit.
Under the new proposals some parents could lose around £2500 if one parent earned over £44,000 whilst a family with 2 working parents earning £40,000 each would enjoy a total household income of £80,000 and retain all their benefits. With the 40% threshold due to fall in 2013 to around £42,000 more families affected further still.
Chris Leslie, Shadow Treasury minister hit out: “The government’s current plans to cut child benefit are unfair and highly bureaucratic.”
David Cameron commented in an interview with House Magazine that he had concerns the structure of some of the proposed changes. He said:”Some people say that’s the unfairness of it, that you lose the child benefit if you have a higher rate taxpayer in the family but 2 people below the level keep the benefit”
He continued: “So there’s a threshold, a cliff edge issue. We always said we would look at the steepness of the curve, we always said we would look at the way it’s implemented and that remains the case. But again, I don’t want to impinge on the chancellor’s Budget.
Quoting Culture Secretary Jeremy Hunt from an interview with BBC Radio Surrey he said: “We are looking to make things fairer.” “Particularly, there’s this sort of cliff edge effect that if someone gets over the top rate limit they lose child benefit, but there could be two people who are just under the limit in a household and have a combined income of much, much more than that who continue to claim it. So we want to look at the fairness issue there and see if there’s anything we can do to improve it.”
Chris Grayling, Employment Minister stated on BBC Newsnight however that he would be “surprised if there was a major U turn on child benefit”.
If you are in need of child benefit advice you should contact a free debt charity such as Debt Support Trust or Citizens Advice Bureau.
David Cameron has admitted there was an issue with the proposed thresholds in the wake of increased criticism that single earning families were being unfairly hit.
Under the new proposals some parents could lose around £2500 if one parent earned over £44,000 whilst a family with 2 working parents earning £40,000 each would enjoy a total household income of £80,000 and retain all their benefits. With the 40% threshold due to fall in 2013 to around £42,000 more families affected further still.
Chris Leslie, Shadow Treasury minister hit out: “The government’s current plans to cut child benefit are unfair and highly bureaucratic.”
David Cameron commented in an interview with House Magazine that he had concerns the structure of some of the proposed changes. He said:”Some people say that’s the unfairness of it, that you lose the child benefit if you have a higher rate taxpayer in the family but 2 people below the level keep the benefit”
He continued: “So there’s a threshold, a cliff edge issue. We always said we would look at the steepness of the curve, we always said we would look at the way it’s implemented and that remains the case. But again, I don’t want to impinge on the chancellor’s Budget.
Quoting Culture Secretary Jeremy Hunt from an interview with BBC Radio Surrey he said: “We are looking to make things fairer.” “Particularly, there’s this sort of cliff edge effect that if someone gets over the top rate limit they lose child benefit, but there could be two people who are just under the limit in a household and have a combined income of much, much more than that who continue to claim it. So we want to look at the fairness issue there and see if there’s anything we can do to improve it.”
Chris Grayling, Employment Minister stated on BBC Newsnight however that he would be “surprised if there was a major U turn on child benefit”.
If you are in need of child benefit advice you should contact a free debt charity such as Debt Support Trust or Citizens Advice Bureau.
Thursday, 12 January 2012
Is a trust deed appropriate for my circumstances?
Many more people than ever before are finding themselves caught out with mounting debts caused by unemployment within the family, cost of living outstripping increases in wages, pay freezes or overtime that was once assured and had been factored into everyday living costs is now a thing of the past.
For many, the reason they have found themselves in financial difficulty was unforeseeable and therefore to a large extent unavoidable. People handle the stress and pressure of debt in different ways, some will react immediately, seek advice and be proactive about their situation and, if the change in circumstances is only likely to be temporary then it may be that a period of moratorium is all that’s required in order to stabilize the situation. A period of moratorium means a request is made to the creditors explaining the change of circumstances and requesting token payments are made usually for a period of 6 months to give the debtor time to regain control of their finances.
For others however they struggle to deal with creditors resulting in avoidance of telephone calls and generally being non responsive to requests for payments they are unable to make. If a person’s financial position has became untenable with no prospect of this changing in the near future there are solutions to help.
If a person lives in Scotland there is a solution available called a trust deed or (once approved by creditors) a protected trust deed. This solution is not suitable for everyone and advice should be taken before entering a solution such as this. A trust deed will typically last 3yrs and has the benefit of collecting all your debts into one central pot. An insolvency practitioner’s services are required as this is a legally binding arrangement between yourself and your creditors.
Once the insolvency practitioner has completed an income and expenditure the IP will have a full understanding of the financial position .If there is disposable income after reasonable living expenses have been deducted then this sum of money would be included in a proposal to the creditors.
If the creditors accept the proposal then, 5 weeks after the meeting of the creditors and the IP the trust deed takes on a “protected” status. This means it has been accepted and is legally binding. At this point the IP is generally referred to as the trustee and it is there job to manage the case for the duration of the solution. Part of this process will involve full disclosure of all monies received during the length of the trust deed , in some instances this can mean paying more into the solution however it may also mean paying less dependent on circumstances.
Once the trust deed becomes protected the creditors are no longer allowed to contact the debtor directly which means all harassing telephone calls or countless demand letters must stop. If they continue then the trustee should be informed immediately as the creditors are acting illegally.
If you own a property with equity in the home a trust deed may not be appropriate however as dependant on the amount of equity you may have to sell the property in order to pay this money to your creditors.
It will also have a negative impact on your credit rating for at least 6 yrs and whilst a person is in the trust deed they are not permitted to seek further credit .The reality however is many people’s credit ratings are already badly damaged through defaults being put on the credit file by the time they have addressed the situation. In addition, the fact a person can once again answer the telephone knowing it will not be a creditor chasing money or get a good night’s sleep generally outweighs the negatives.
For many, the reason they have found themselves in financial difficulty was unforeseeable and therefore to a large extent unavoidable. People handle the stress and pressure of debt in different ways, some will react immediately, seek advice and be proactive about their situation and, if the change in circumstances is only likely to be temporary then it may be that a period of moratorium is all that’s required in order to stabilize the situation. A period of moratorium means a request is made to the creditors explaining the change of circumstances and requesting token payments are made usually for a period of 6 months to give the debtor time to regain control of their finances.
For others however they struggle to deal with creditors resulting in avoidance of telephone calls and generally being non responsive to requests for payments they are unable to make. If a person’s financial position has became untenable with no prospect of this changing in the near future there are solutions to help.
If a person lives in Scotland there is a solution available called a trust deed or (once approved by creditors) a protected trust deed. This solution is not suitable for everyone and advice should be taken before entering a solution such as this. A trust deed will typically last 3yrs and has the benefit of collecting all your debts into one central pot. An insolvency practitioner’s services are required as this is a legally binding arrangement between yourself and your creditors.
Once the insolvency practitioner has completed an income and expenditure the IP will have a full understanding of the financial position .If there is disposable income after reasonable living expenses have been deducted then this sum of money would be included in a proposal to the creditors.
If the creditors accept the proposal then, 5 weeks after the meeting of the creditors and the IP the trust deed takes on a “protected” status. This means it has been accepted and is legally binding. At this point the IP is generally referred to as the trustee and it is there job to manage the case for the duration of the solution. Part of this process will involve full disclosure of all monies received during the length of the trust deed , in some instances this can mean paying more into the solution however it may also mean paying less dependent on circumstances.
Once the trust deed becomes protected the creditors are no longer allowed to contact the debtor directly which means all harassing telephone calls or countless demand letters must stop. If they continue then the trustee should be informed immediately as the creditors are acting illegally.
If you own a property with equity in the home a trust deed may not be appropriate however as dependant on the amount of equity you may have to sell the property in order to pay this money to your creditors.
It will also have a negative impact on your credit rating for at least 6 yrs and whilst a person is in the trust deed they are not permitted to seek further credit .The reality however is many people’s credit ratings are already badly damaged through defaults being put on the credit file by the time they have addressed the situation. In addition, the fact a person can once again answer the telephone knowing it will not be a creditor chasing money or get a good night’s sleep generally outweighs the negatives.
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