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The number of people facing bad loan debts and insolvency in the UK has always been a cause for concern, but since the recent credit crunch and banking crisis hit the country a few years ago, many people who would previously not have suffered from bad loan debts have been affected.

Cheap loans an easily available credit in the years prior to the credit crunch has meant that many people borrowed large amounts of money on personal loans, home owner loans and other forms of credit, without worrying too much about it, but with the recent turn of events in the UK economy, many of these individuals are now struggling with their loan debts.

The latest figures to be published by the Insolvency Service in the UK have shown that the total number of people finding difficulty with their loans and other debts has fallen slightly by the third quarter of this year, leading to fewer cases of insolvency and bad loan debt.

The number of personal insolvencies in the UK had fallen to 30,219 by the end of the third quarter this year, which shows a reduction of 11 per cent on the same period twelve months previously.

Although the number of debt relief orders (DRO’s) an Individual Voluntary Arrangements (IVA’s) has increased slightly in the last three months, the number of bankruptcies has fallen significantly to 9,567 by the end of September, compared with 11,113 at the end of the previous quarter.

One thing which has changed in the area of loan debt and insolvency, is the type of person who is now being affected by bad loan debts. Whereas it used to generally be the lower social classes who suffered from bad loan debts and financial difficulty, this problem now seems to be affecting all social classes.

A study of the latest insolvency figures by the debt management company, The Debt Advisor, has revealed that in many cases it is now the more “well to do” individuals who are suffering from bad loan debts, as well as the lower social classes.

With personal debt levels on things like personal loans and credit cards at an all time high level in the UK at the moment, regardless of social class, the effects of rising unemployment and high inflation are having an impact across everybody in the UK and The Debt Advisor is seeing an increase in the number of middle class individuals coming to them for help.

Prior to the credit crunch, this group of people were spending large amounts of money, much of it being taken on credit in the form of cheap loans which were easy to access. But a weak economy, coupled with high inflation, reduced wages and potential negative equity on their home owner loan, has left many in this group in the position where they simply an not afford to repay their loan debts.

Bev Budsworth of the Debt Advisor said “Levels of personal insolvencies are not as high as last year but we are still seeing over 330 people a day being declared insolvent or bankrupt. The real change that we are seeing is the demographics of the people that are finding themselves with levels of serious loan debt-we are seeing a strong increase in the “impoverished middle classes” coming to us for help as the situation becomes more and more desperate.”

Many of the people who are now seeking help with their loans and other debts have previously been in the position where they have easily been able to manage their loan repayments on a regular basis, simply from their monthly disposable income, but changes in their personal circumstances, such as a job loss, has left them struggling to pay their loans, thereby missing repayments and building up high levels of loan arrears.

To compound this situation, many of these people also have children who are now of a working age, but are unable to find themselves a job. Whereas in the past, many of these children would be bringing in an additional wage into the household, they are now an additional burden on family finances which are already stretched and are pushing many parents beyond breaking point into unmanageable loan debt.    

The Debt Advisor has seen people taking ever more desperate steps to try and keep their heads above water financially, with many resorting to taking out personal loans to help fund their lifestyle, or using a credit card to make their home owner loan or mortgage repayment, with others being forced to take out a pay day loan or even use illegal loan sharks to get a loan.

Recent figures from the loan debt charity Credit Action found that the total level of personal debt in the UK on loans and credit cards currently stands at around £1,451 billion, which equates to every adult in the UK owing an average figure of £30,000, including home owner loan debt. This figure works out at 122 per cent of the average earnings in the UK.

The average household loan debt in the UK currently stands at around £56,000 including home owner loans and mortgages, but the Office for Budget Responsibility (OBR) has predicted that household debt will increase to around £2,126 billion by the end of 2015, which works out at every household in the UK having an average loan debt of nearly £82,000.

Bev Budsworth commented “Understandably, people are watching the pennies and the economic uncertainty and record high inflation is forcing them not to spend unless it’s absolutely necessary. Unfortunately, this is only going to make the slow down worse. What we really need is more money flowing through  the economy if we are to turn ourselves around.”