One person a day in York will become insolvent (From York Press)

One person a day in York will become insolvent

9:43am Monday 21st January 2013 in News By Kate Liptrot, kate.liptrot@thepress.co.uk

AT least one person a day in York will become insolvent this year and lives are being torn apart as the economic crisis continues, an expert has predicted.

More than 250 people in York became bankrupt last year and more than 100 were the subject of debt relief orders (DROs) declaring them insolvent.

This year, numbers are expected to rise further, York Citizens Advice Bureau (CAB) has said, with roughly the same number going bankrupt and about 125 expected to take out DROs.

Many people are suffering mental health problems and even attempting suicide as a result of their difficulties, the organisation said.

Pay day loans, changing circumstances, changes to the benefit system and the impact of the recession on self employed people are among the reasons given for the rise.

Kevin Butler, a debt case worker for York CAB, said: “I have seen several people in the past 12 months who have tried suicide because of their debts. A study has shown that about 50 per cent of people in debt have some kind of mental health problem. It’s something we see.

“We see a lot of relationships that have ended and lack of money is a big factor in that.”

DROs – which write off debts of less than £15,000 for those with a low income – are becoming increasingly common as the administration costs £90 compared with bankruptcy which starts at about £500. Both bankruptcy and DROs stay on an individual’s credit rating for six years.

In Selby, 28 people took out DROs and fewer than 20 filed for bankruptcy in 2012.

A Selby CAB spokesman said: “We fear an even bigger percentage increase in those needing DROs or bankruptcy over the next few years because of the prevailing economic climate”.

In Ryedale, a CAB spokesman said bankruptcy was not being used as often as DROs, which were on the rise.

Yvonne Wood, a debt advisor at the branch, said she expected changes to the benefit system this year would worsen the situation.

Smaller numbers of people are also expected to enter into other formal insolvency orders to pay off some of their debt over a fixed period, York CAB said.

People struggling with debt or would like help budgeting can attend a drop-in session at York CAB in Blossom Street on Monday, Tuesday or Thursday mornings, or phone 08444 111 444.

Case study

WHEN former serviceman John Taylor* retired, he found it impossible to continue paying his credit card and loan debts.

The York man found he could manage only £1 a month to creditors who continued to pressure him for the same payments and to threaten him with legal action.

Mr Butler said: “He was very worried because creditors were still demanding the same amount of money. Creditors are very good at threatening people with action they are allowed to take, but often they don’t do it.”

Having spoken with advisors at York CAB, it was decided a debt relief order would be the best option. As he struggled to pay the £90 fee, the Royal British Legion stepped in to pay the costs. Mr Taylor said his life had been transformed by the order.

•Name changed to protect anonymity.