1 in 5 of those who file for Bankruptcy under 30

FRIDAY, OCTOBER 13, 2006

We know that many people are currently in serious financial trouble in the UK, but almost 20% of those who go bankrupt because of debt are under the age of 30 with outstanding student loans. This is an increase from the 7.9% rate in 2001 for bankruptcies among those who were 18 to 29 years old.

The proportion of bankruptcies among the 18 to 29-age group has jumped from 7.9% in 2001 to 18.7% last year. The average age of a bankrupt has fallen from 43 to 41 in the last four years but female bankrupts tend to be younger than male bankrupts.

The figures, from the Insolvency Service, highlights a worrying trend for a Government that is trying to encourage pension saving amongst the young. The UK's consumer debt mountain, which includes mortgages, currently stands at £1.2 trillion and shows no signs of shrinking.

Today, the Financial Services Authority again called for more education to young people about finances to help improve the debt situation of the next generation and help those currently in debt to learn how they can reach financial freedom.

Philip Long, head of corporate recovery at accountancy firm PKF, said: 'It's easy for young consumers to get credit. As soon as they finish college they are offered consolidation loans for their student debts and it's too easy to make the situation worse.'î

He went on to say that the average age of those who have filed for bankruptcies will decrease further as student fees are to be increased, requiring young people to take out larger loans that they do not have the money to pay back. He also said that bankís inability to correctly determine a borrowerís ability to repay is a major problem. 'We had a bar maid come to us who earned £1,000 a month gross, living in London. She had £30,000 worth of store card debt.

Insolvency Service director of policy Mike Norris said: 'The research gives us some interesting information about the characteristics of bankrupts over the period. While the profile might be changing in some respects, men in their 30's and 40's continue to account for the largest number of bankruptcies and average scheduled debts continue to fall between £45,000 and £50,000.

According to the National Insolvency Service, almost 66% of all those who filed for bankruptcy in 2005 were men who owed on average, £46,000. This year, more and more women are going into debt as there have been 7% increase in the percentage of women who have filed for bankruptcy. This rate now stands at 39%.