A substantial fall in the number of people going bankrupt could be due to high fees not any improvement in personal finances, a leading debt advice body has warned.
Joanna Elson, the chief executive of the Money Advice Trust, said that a 10 per cent fall in the numbers of people going insolvent "may largely be driven by increases in the fees required to make yourself bankrupt".
She added: "People struggling with debt often can't afford the £700 it costs to go bankrupt [£525 for the deposit plus £175 for the court fee], even though it would otherwise be their best option.
"This leaves them in a financial black hole. The numbers using debt relief orders, one of the cheaper remedies, has risen."
On Friday, it was revealed there were 27,390 personal insolvencies in England and Wales in the second quarter of this year, a 10 per cent decrease on the same period a year ago and the lowest figure since the summer of 2008.
The figures are a surprise as the UK has recently entered recession, but Ms Elson warned insolvencies may spike again later this year: "These figures are likely to get worse, with incomes increasingly unable to match rising prices."
There are many reasons why you may have been the victim of payment protection insurance (PPI) mis-selling. If you have been mis-sold PPI you could be entitled to claim compensation. To help you find out if you are a victim I have produced a quick checklist so you can see if you may have a claim.
First, you need to check if you had PPI on any credit cards or personal loans during the past six years, even if you have since paid them off. If you did have PPI then run through the checklist below your bank or lender had a responsibility to ensure the PPI was suitable for you at the time it was sold to you.
· Did your bank or lender tell you that you must have the PPI as part of the deal to get the credit card or loan? If so, that’s wrong. Having PPI is entirely optional.
· Was the PPI added to your credit card or personal loan without your knowledge? For most people it is not immediately apparent they are paying for PPI because its cost is merged into the loan repayments. The terms and cost of the insurance should have been explained and checked for suitability.
· Were you unemployed, self-employed, redundant, a student or retired? If so and you were sold employment cover as part of the PPI policy then it’s often worthless. You should have been made aware of this.
· Did you have any pre-existing medical conditions? Your bank or lender should have checked this as any pre-existing medical conditions are likely to be excluded from the PPI cover. You should have been made aware of this.
· Did you already have existing cover through benefits available from your employer? If so, your bank or lender should have checked this.
If one or more of these points apply to your circumstances at the time the PPI policy was sold to you, then it’s likely you are the victim of mis-selling.
The Financial Services Authority (FSA) announced today that Lenders paid out £570.5 million in compensation during April to victims of payment protection insurance (PPI) mis-selling.
This is the largest overall monthly pay out and pushes the total paid out since January 2011 to £4 billion. But with an estimated £9 billion of compensation due in total, the process is far from over.
Last month, Lloyds Banking Group, RBS and HSBC set aside £800 million extra between them, on top of their original pots to pay out from. Barclays also set aside an extra £300 million in April.