Personal debt experts, MoneySolve fear for the future as bankruptcy applications reach record numbers. Predictions of an impending crisis aim to warn consumers who think bankruptcy is an easy way out. However it can have some far reaching consequences that may make the average person think twice before applying for one.
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Insolvencies were up 1.7% to over 25,000 based on figures from the previous quarter. By the end of 2008, more records are set to be broken as the number of bankruptcies is expected to reach 130,000. Consumer debt is expected to reach £1.5 trillion by 2009. The situation seems to be a lot worse than the official figures show. An industry insider recently said, "For every consumer that declares their bankruptcy, there's someone else who finds alternative means to address their debt." They added, "The credit crunch is going to continue making this situation worse."
Compared to figures from the same period in 2007, the number of insolvencies is down. This is attributed to an increase in IVAs or Individual Voluntary Arrangements. These were marketed as an alternative to bankruptcy, allowing debtors to write off a certain portion of their debt.
This drop in the number of insolvencies is expected to be temporary as banks have recently made it more difficult to apply for an IVA. We can expect to see a number of alternatives to bankruptcy in the coming year that will provide debt solutions without the stigma associated with bankruptcy.
In contrast to the difficulty in acquiring an IVA, applying for bankruptcy is now easier than ever but is it really the right decision? Is it the only way to solve
The procedure for becoming bankrupt has become very straightforward and is seen by many as an easy way out of debt. All that is needed to be declared bankrupt is to:
- Complete declaration forms available from local county courts.
- Provide details of all assets owned and all debts owed.
- Pay the associated court fee and administration deposit.
The declaration can be processed immediately and the debtor can be declared bankrupt the same day.
Following this, the debtor will be issued with a Bankruptcy Order. They will then be required to meet their local Official Receiver. The role of the Official Receiver is to review the circumstances and causes of the
The duration of
This all sounds easy and it is understandable why many debtors consider bankruptcy as a solution to their debt problem. However the negative, long lasting consequences of bankruptcy need to be considered as they can have a lasting impact on the debtor and their family.
The trustee associated with the debtor's bankruptcy has three years to deal with any property owned by the debtor. During these three years the trustee can:
- Sell their property
- Have a charging order issued. This means that any money generated by the property, through rent or sale, will got to the trustee.
- Arrange terms for the debtor to buy the trustee's interest in the property. These terms can be arranged with those with whom the debtor shares ownership of the property.
Bankruptcy terms usually last one year. However they are at risk of further action, in terms of assets, for a further two years. Many people forget that after the expiration of their bankruptcy order, their home, or their share of it, remains in the hands of the trustee.
At worst this can mean their house is sold regardless of their bankruptcy status. The consequences of this can be devastating for the debtor's family family. As mentioned above, this can also be the case if they own a share in a property.
Bankruptcy Restriction Order (BRO)
A BRO is an extension of a Bankruptcy Order that can be imposed on the debtor at the end of the bankruptcy terms, which is usually one year. A BRO is issued if the Official Receiver deems that the debtor has been irresponsible during the terms of their bankruptcy.
Examples of irresponsible behaviour could be:
- Gaining more debt during their bankruptcy period.
- Gaining more debt with the intention of applying for bankruptcy.
- Selling assets and giving the money to family members.
Consequences of a BRO
- The person cannot be a director of a company.
- Creditors must be made aware of the debtor's bankruptcy status if they apply for credit for more than £500.
- Any trading partners must be told about past bankruptcy including the trading name used when declared bankrupt.
- These restrictions can last between 2 and 15 years.
The relative ease that is associated with applying for bankruptcy may be related to the rise in insolvencies in the first quarter of 2008. Initially bankruptcy may seem like an easy way to get out of debt. However complications can, and do, arise from this kind of debt solution. Will the result of bankruptcy be worse than the debt? This all depends on the personal circumstances of the debtor. Careful consideration and advice from a
ING’s new survey demonstrates the central role life insurance plays in a comprehensive financial plan, including the important role of wealth protection. Financial-planning experts say that inadequate life insurance can be swiftly disastrous to families that don’t properly anticipate and assess the impact death of a spouse or partner can have on short- and long-term finances.
Windsor, Conn. (
“The new survey further clarifies the savings and wealth protection needs of Americans. The insight into consumers’ perceptions about their financial future and the wide-ranging reasons for saving money and having adequate life insurance may even seem contrary to popular assumptions about people and their money,” said Catherine Smith, CEO, ING U.S. Insurance. The wide-ranging survey by Ipsos Public Affairs of more than 1,000 adults revealed Americans’ contemporary attitudes and thinking on protecting their financial future and on life insurance, traditionally part of working people’s financial plan.
The survey demonstrates the central role life insurance plays in a comprehensive financial plan, including the important role of wealth protection. Financial-planning experts say that inadequate life insurance can be swiftly disastrous to families that don’t properly anticipate and assess the impact death of a spouse or partner can have on short- and long-term finances.
“As Baby Boomers’ financial needs have evolved, we see the heightened importance of risk protection combined with wealth creation,” Smith said. “Insurance products can help provide an important protective wrapper around retirement savings. This insurance wrapper effectively manages a diversity of risks and allows consumers to enter their retirement years with more confidence. Bottom line — life insurance has become the forgotten foundation of a long-term, comprehensive financial plan.”
Among the most interesting findings of the survey:
- The top scenario Americans say would most negatively impact their financial future is having their savings stolen because of fraud/theft (77% say it would have an extremely or very negative impact). The second scenario Americans believe would most negatively impact their family’s financial future is their death or the death of their spouse or partner (67%).
- Of 15 events or scenarios listed, falling home prices, a stock market crash, Social Security becoming insolvent, an economic recession, a pay cut and higher interest rates on loans and mortgages were all cited as having less of a negative impact on their family’s financial future than their death or the death of their spouse or partner.
- Despite life insurance’s low profile compared to prevailing popular focus on wealth accumulation and investing, nine in 10 survey respondents said that people in their situation should have life insurance, although the reasons for doing so often vary between generations.
- Nearly a quarter of the 86 percent of people who thought they should have life insurance, do not have it.
- A significant majority of Americans (58%) say they do a better job saving and protecting their money than their parents do or did; and an even greater majority (65%) say they do a better job saving and protecting money than their friends and acquaintances.
- Younger Americans tend to look to life insurance for taking care of a wider range of needs compared with older Americans, including funeral costs, children’s future education costs, and several years of household expenses, indicating that they see life insurance as playing a bigger role as far as wealth protection and wealth accumulation than do older Americans.
- More Americans would rather go bungee jumping or stand in front of a crowd to make a speech than talk about life insurance, but more would rather talk with an agent about life insurance than sit through a job performance review with their supervisor, fill out a college application, or deal with a medical insurer about a planned surgery.
- When it comes to advice and insight on life insurance issues, many respondents who have life insurance primarily consulted with an insurance agent or financial advisor about how much life insurance they needed (33%) — significantly more than those who consult with friends or family members or who simply chose a standard life insurance option available through work.
According to LIMRA International’s 2005 Trend in Life Ownership study, nearly 68 million Americans have no life insurance coverage; yet according to the ING survey, most Americans (71%) feel it is something they should not do without. Some of the most common misperceptions about life insurance are related to coverage amounts. Eight in 10 Americans say that they would need one or two year’s worth of household expenses to be paid by life insurance, while two-thirds say they would need at least 10 years of household expenses for their family. However, many financial advisors recommend families have more life insurance than that, depending on individual situations and financial circumstances. Annual budgetary items, such as mortgage payments, child care, insurance and basic living expenses, are all important factors to include.
“With term life rates continuing to drop and life expectancy rising, life insurance is the most affordable it’s ever been,” said Smith. “Americans need to leverage experienced life insurance professionals or the internet to find a product that best suits their needs and budget. It is as simple as getting any other form of insurance and just as essential to adequately protect your family and your assets.”
ING offers helpful tips and tools for people exploring life insurance, including a do-it-yourself
Commissioned by ING and conducted by Ipsos in late 2007 and early 2008, the ING Life Insurance Study included over 1,000 randomly selected participants. The data are weighted to ensure the sample regional, age and gender composition reflects the actual U.S. population, and the margin of error is +/- 3.1%.
ING is a global financial institution of Dutch origin offering banking, investments, life insurance and retirement services to over 75 million private, corporate and institutional clients in more than 50 countries. With a diverse workforce of over 125,000 people, ING comprises a broad spectrum of prominent companies that increasingly serve their clients under the ING brand.
In the U.S., the ING (NYSE: ING) family of companies offer a comprehensive array of financial services to retail and institutional clients, which includes life insurance, retirement plans, mutual funds, managed accounts, alternative investments, direct banking, institutional investment management, annuities, employee benefits, financial planning, and reinsurance. Life insurance products are issued by ReliaStar Life Insurance Company (Minneapolis, MN), ReliaStar Life Insurance Company of New York (Woodbury, NY) and Security Life of Denver Insurance Company (Denver, CO). Only ReliaStar Life Insurance Company of New York is admitted, and its products issued within the state of New York. All are members of the ING family of companies. ING holds top-tier rankings in key U.S. markets and serves over 14 million customers across the nation. For more information, visit
Ipsos Public Affairs is not affiliated with ING.
Philip Margolis, ING
phil.margolis @ us.ing.com
Chuck Eudy, ING
chuck.eudy @ us.ing.com
SAN DIEGO (
Guild Mortgage Company recently completed the acquisition of Liberty
Financial Group, a Bellevue, WA residential mortgage bank. Liberty
annually originates close to $1 billion of prime home loans through its
network of branches located predominately in Washington and Colorado.
Guild Mortgage Company was acquired in 2007 through a partnership formed
with the senior management of Guild Mortgage and McCarthy Capital. “McCarthy
Capital’s approach combines the stability we
were looking for in a partner with the resources we needed for continued
growth,” said Mary
Ann McGarry, President and CEO of Guild. “Our
partnership with McCarthy Capital will help us continue to expand our
reputation and reach within the mortgage industry.”
“We are pleased that Mary Ann and her team
have been able to act so quickly in the advancement of Guild’s
growth strategy with this acquisition of Liberty. Because Mary Ann and
her team understand this complex industry they can jump at opportunities
that others are not equipped to advance,” said Robert
Myers, a Partner at McCarthy Capital Corporation. “We
believe there are substantial opportunities in particular markets to
acquire high-quality residential mortgage originators and mortgage
About Guild Mortgage Company
Guild Mortgage Company is a 46 year-old, privately owned mortgage
banking company focused on originating, servicing and selling
residential loan products primarily in California and other western
About McCarthy Capital
McCarthy Capital Corporation is an Omaha-based private equity firm with
approximately $1 billion under management. McCarthy Capital is a
subsidiary of McCarthy
guild mortgage, mccarthy capital, residential mortgage