Revealed: How problem debt is forcing thousands into insolvency

Rising numbers of insolvency cases across England and Wales is a cause for concern for debt advice experts, who have warned that the option “should not be undertaken lightly”.

Insolvency Service figures show that 2,585 people in the Black Country were unable to pay their debts in 2018, and were forced to enter into repayment plans with creditors.

Another 596 got into trouble in Cannock Chase, South Staffordshire and Stafford.

The Money Advice Trust, which runs the helpline National Debtline said the rise reflected “the challenging times that many people face”.

Jane Tully, a director at the trust, said: “We know that there are a range of issues putting pressure on many already stretched budgets.

“But insolvency options should not be undertaken lightly, and it is crucial that people receive free, impartial debt advice before deciding the best course of action to take.”

Figures in your area

The insolvency rate in the Black Country is 28.6 cases per 10,000 people, higher than the England and Wales average of 25 per 10,000.

The highest number of insolvency cases in the region was in Walsall, where there were 684, just two higher than Sandwell.

There were 630 cases in Wolverhampton and 589 in Dudley. Fewer people have been affected in Staffordshire, the figures showed, with 229 cases in Cannock Chase, 212 in Stafford and 155 in South Staffordshire.

Across England and Wales, almost 28,000 people were declared insolvent last year, and the insolvency rate has increased for the third year running.

The StepChange Debt Charity provides free advice and a range of services across the UK and says problem debt is a widespread issue across the country.

Most people are in problem debt because of financial shocks like illness or unemployment, rather than simply because they have overspent, it says.

Support

Will Berrington, spokesman for StepChange, said: “People experiencing problem debt may not initially realise the difficulties of their situation, or indeed that there is free help out there for them to access.

“There is no minimum threshold for seeking debt advice, and impartial debt advisors will be able to take you through a range of solutions and assistance to help get you on your feet.

“Debt solutions are wide ranging, and will depend upon individual situations. Some plans, such as debt management plans, may see you pay your debt paid back over a certain period of time.

“Others, such as an insolvency solution like a debt relief order, may see a certain amount of debt written off, with attached conditions.

“Most importantly, nobody needs to struggle with debt without support.

“A phone call to us or similar organisations is all it takes to have that expertise at your fingertips. For those who cannot call, support can be found at stepchange.org.”

Bankruptcies are included in the insolvency figures, but the count also covers less serious repayment agreements.

These are individual voluntary arrangements - agreements to pay off debts within a set period of time, and debt relief orders - which can write off debt for some low-income individuals who owe less than £20,000 and have no realistic way of paying it off.

Debt relief orders are becoming increasingly common across England and Wales since they were introduced a decade ago.

And while there is a gender imbalance across all types of insolvency, these orders disproportionately affect women, according to the insolvency trade association R3.

Mark Sands, chairman of the association’s personal insolvency committee, said: “This links to the generally more precarious state of women’s finances, as relief orders are used for smaller debt and asset levels.

"The gender split is also a sober reminder that women are more likely to be economically disadvantaged than men.

"Women are also more prone to becoming insolvent following the breakdown of a relationship with men, as the Insolvency Service found several years ago.”