Coastal areas face insolvency shock.

23rd July 2019.

Insolvency trade body R3 has warned that people living in coastal areas are more vulnerable to economic shocks that can trigger insolvency.

Having analysed annual personal insolvency statistics from the Insolvency Service, an R3 spokesman said: “Looking at the geographical spread in the statistics, coastal towns throughout England and Wales typically had the highest concentrations of personal insolvencies, following the pattern established in recent years.”

Mark Sands of R3 said:-

“The areas with the highest levels of personal insolvency are largely unchanged from last year. A higher personal insolvency rate is a symptom of wider deprivation, and highlights the need for debt advice services to be targeted and tailored for people living in less affluent areas.

“The historical retreat of the industrial sector caused decades of hardship in many places, as well-paying jobs disappeared which were replaced, at best, by more precarious and worse-paid employment.

“Coastal areas often have higher rates of personal insolvency than inland areas. As places which often depend on an influx of tourists in the summer months for income, they are dependent on the consumer pound, which has been in shorter supply of late. The seasonal nature of tourism-related work makes it hard for many residents to build up savings to last them in leaner times, leaving them vulnerable to the type of economic shock that can often trigger insolvency.

“Although the rate of growth of consumer debt has slowed, the amount owed by individuals is still rising, while inflation-adjusted employees’ earnings are still lower than before the 2008-2009 recession, according to the ONS. Ensuring that people in problem debt are aware of their options, and that they can access a suitable form of personal insolvency if that is the best option for them, should be a priority for the Government.”

Different types of insolvency

Bankruptcy: During a bankruptcy your assets are placed under the control of a trustee who will use them to raise money to repay creditors. You are bankrupt for a year (during which you are subject to some restrictions, such as not being able to be director of a company), although your assets may stay under the trustee’s control after that. A creditor may petition the court to have you made bankrupt if you owe them at least £5,000, or you can apply to be made bankrupt yourself (which costs £680 in up-front government and court fees for online applications). With some exceptions, your debts are ‘cancelled’ at the end of the process.

Individual Voluntary Arrangements: A statutory agreement between you and your creditors to repay a certain portion of your debts over a certain period of time. You retain control of your assets and the agreement is overseen by an independent supervisor. You usually have to have some surplus income left over after your living costs every month from which to make payments.

Debt Relief Orders: You may enter a DRO if you have under £1,000 of assets and under £20,000 of debts. Your assets are not used to repay creditors and your debts are ‘cancelled’ at the end of the process. Like bankruptcy, you subject to some restrictions for a 12 month period.