Finance: Old and bankrupt

At a time in their lives when they expected to be financially secure, more and more pensioners are going bankrupt.

Grant Woodward reports on a worrying phenomenon.

The cost of living is going up for all of us, stretching our finances to breaking point.

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Inflation and VAT have both risen, the price of petrol and other essentials is soaring and for many the threat of redundancy still looms large in the background.

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It's little wonder then that bankruptcy among all age groups has gone up in the past 10 years, with the highest prevalence among 35 to 44-year-olds, according to figures compiled by the UK Insolvency Service.

In 2009, the number of people declaring themselves bankrupt reached a 20-year high and although it dipped last year, the service and debt charities have pointed to pensioners as being the fastest growing group of bankrupts.

The number of over-65s declaring bankruptcy has increased six times in a decade and at a 50 per cent faster rate than for other age groups.

Among women aged over 65, the rate of bankruptcy has grown even more sharply, increasing over ten times between 2000 and 2009.

Many older people get into debt because their income drops sharply once they reach retirement due to inadequate pension provision. They may also still have the same expenses to pay as before they stopped working.

Changes in circumstances, such as divorce, bereavement, illness and disability, can also contribute to debt problems.

"A lot of people over 65 have different sets of circumstances, higher debt levels but lower incomes," says Una Farrell from the Consumer Credit Counselling Service (CCCS), the UK's leading debt charity which gives help and advice to people struggling with debt.

"There are lots of possible reasons for the increase in bankruptcy among over 65s. Pension funds, for instance, have been hit hard over the last few years.

"There is also the fact that people are having children later on in life, so they may be in their 60s and still having to support children who are at university or just starting out.

"Another factor is that while the Baby Boomer generation did very well out of the property market, their children could be struggling to get on the property ladder so they may be helping them out financially."

The average debt for a CCCS client over the age of 55 is 25,826, compared to 24,274 for CCCS clients overall.

By way of contrast, the average annual income of a CCCS client over the age of 55 is 12,920, significantly lower than the 17,316 for CCCS clients overall.

"It's much harder to increase your income when you are older," says Ms Farrell. "Even if you have been good with your financial planning, something unexpected may have happened, such as an illness in your 50s that meant you couldn't work, or losing a partner.

"Care can be very expensive if you fall in between being able to afford it and being eligible for free care.

"In that age group too there are many people whose parents are still alive and also have children, so they're sandwiched between two generations and find themselves having to support both when they weren't expecting to."

Going bankrupt can take the pressure of creditors away from you. You are allowed to keep certain things, like household goods and a reasonable amount to live on.

When the bankruptcy order is over, you can make a fresh start and the money you owe is usually written off.

However, there are disadvantages – you will lose your home if you're a homeowner. Also it costs money to go bankrupt and you might not have enough money.

There are concerns that many people struggling with debt often don't know that the insolvency regime offers them more than just bankruptcy.

Statistics published by The Insolvency Service show that for the last financial year (2009/10) there were 139,571 individual insolvencies in


Of these 72,480 were bankruptcy orders, 17,475 were debt relief orders and 49,616 were individual voluntary arrangements.

"Although personal insolvency levels are no longer rising, they remain stubbornly high, reflecting the high levels of personal debt that persist across the country," said Stephen Speed, chief executive of The

Insolvency Service.

"Prevention is much better than cure as far as personal finances are concerned. Review your personal finances frequently and make sure you are not taking on debt that you can't afford to repay.

"If you are getting into trouble, act quickly and seek advice about how to deal with it. There are plenty of sources of advice, many of which are available free of charge. If insolvency looms then remember that you have choices.

"Discuss these with your adviser and make sure you understand which one is best for you."

An increasingly popular route out of debt is equity release, which is a way of raising money against the value of your home.

You usually need to be at least 55 years old and the older you are, the more money you are likely to be able to raise from the scheme. You must have have paid off your mortgage, or have very little left to pay off, and own a property in a reasonable condition.

You can get a lump sum, regular income, or both. Reputable plans guarantee you will be able to continue living in your home until you die or go into a care home and you may be able to cut Inheritance Tax bills.

However, equity release is a complex subject and the charity Age UK strongly recommends that people take independent legal and financial advice before deciding to do it.

The organisation publishes a book‚ Equity Release Made Easy‚ which explains how it works.

"There is a lot of equity in homes as prices have increased at a much higher rate than salaries and a lot of people have done very well over the last 30 years or so," says Una Farrell.

"But it is important to speak to your family and seek professional independent advice before doing anything.

"Another option is downsizing, which can often make sense from a financial point of view, but for emotional reasons some people may want to stay in their homes."

* For help with debt visit or call the Consumer Credit Counselling Service's free helpline on 0800 138 1111.


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