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."
One in five struggles to pay bills
Families' budgets are squeezed by increased utility costs, soaring food prices and salary freezes.
Five million households currently face increases in their fuel bills of up to £100-a-year as SSE, the UK’s second biggest energy company after British Gas, said that from mid-October the price of an average annual dual fuel bill will rise from £1,172 to £1,274. Other companies are expected to follow suit.
As well as energy bills rising, mortgage payments are set to increase as other lenders follow Santander’s suit in upping its Standard Variable Rate (SVR).
Many individual salaries are being frozen and one in ten employees is being forced to
take a pay cut.
With the combination of increased utility costs, soaring food prices and a
compounding squeeze on salaries, Moneysupermarket.com has found that 80pc of
households are on a financial budget irrespective of income, demographic or family set up.
In order to ease the financial burden many Brits making extensive cut backs where
they can. Almost half of us have had to use credit in order to pay utility bills, while a 25pc of adults have said that they are forced to rely more on credit cards to ensure that the regular household outgoings are covered.
Clare Francis financial expert at Moneysupermarket.com comments: "The fact a rise in outgoings of £50 or less would tip a third of Brits to ‘financial breaking point’ speaks volumes about how difficult people are finding things at the moment."
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