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Going For Broke

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Going for broke

by Nadia Jefferson-Brown

ONE family a day was made bankrupt in York during the first three months of 2006 - more than double last year's figure.

Shocking new statistics reveal 89 people declared themselves bankrupt in the first quarter of this year, compared with 44 in the same period in 2005.

The rise, which is 20 per cent above the national average, has been partly blamed on easily available credit cards, irresponsible lenders, and a "buy now, worry later" attitude.

York Citizen's Advice Bureau (CAB) saw 11,000 people last year with debt-related inquiries.

Nicky Humberstone, of the CAB, said there had been a steady increase in the number of people who chose bankruptcy as a solution to their cash problems over the last 12 months.

But a new force to solve York's debt problems was being launched today.

The city's town crier, John Redpath, backed the new York Credit Union, which offers loans with low interest rates, as he revealed how he struggled with out-of-control debts for ten years.

It's a card habit to break

SPIRALLING debts have seen the number of people declaring bankruptcy in York double.

Eighty-nine people declared themselves bankrupt in the first quarter of 2006, compared with 44 at the same time last year, according to new insolvency figures.

Easily available credit cards, irresponsible lenders and a `buy now worry later' attitude have been blamed for the 102 per cent rise in the city - 20 per cent above the national average.

York's Citizen's Advice Bureau staff saw more than 11,000 people last year with debt-related inquiries.

The bureau's Nicky Humberstone said: "We deal with many clients who have debt problems and there has been a steady increase in clients choosing bankruptcy as a solution over the past 12 months."

CAB chief executive David Harker said: "Day in, day out, our advisers see evidence of how personal debt problems are overwhelming large numbers of people, with potentially devastating personal and social consequences, including a hugely detrimental impact on people's health, homes, family life and ability to work."

York's town crier John Redpath struggled with out-of-control debts for ten years, but managed to steer clear of bankruptcy. After getting £3,000 of business loans, he spent a decade paying them back - to the tune of nearly £12,000.

"It was a nightmare," he said.

CAB spokeswoman Elise Cross said people's debts were getting bigger, and more people were considering bankruptcy.

"Our evidence shows cases where lenders are selling products without properly checking whether the borrower can afford it, even where there is clear evidence this might be the case."

She said credit is often "poorly marketed with inducements", without enough emphasis on the reality of credit repayments.

Paul Bateman, head of Personal Insolvency at KPMG in the north, said the number of commercial firms looking to advise those in financial difficulty had also increased.

"The fact more people are taking advice on debt is likely to be a major factor in this latest leap in people accepting personal insolvency as the solution to their problems."

Statistics also show that Individual Voluntary Arrangements (IVAs) - where someone in financial difficulty approaches creditors to restructure their debts at an affordable level - have risen by 155 percent on the first quarter of last year.

Mr Bateman said: "The number of people declaring themselves bankrupt is nearly double those seeking an IVA arrangement. This suggests that bankruptcy has lost much of its stigma and is still seen by many as the easier option.

"However, the groundswell of those with spiralling debt problems is so great, that demand for both solutions is increasing dramatically."

Len Cruddas, chief executive of York and North Yorkshire Chamber of Commerce, warned people against believing bankruptcy was an easy way out.

"I would urge people to think hard before taking this step and see whether there is another way."

What is bankruptcy?

BANKRUPTCY is one way of dealing with debts you cannot pay.

The proceedings free you from overwhelming debts and ensure your assets are shared fairly among your creditors so you can make a fresh start.

But bankruptcy is publicly advertised, there is a stigma attached of having to declare yourself as a bankrupt for certain transactions, and restrictions are imposed.

You cannot act as a company director or hold certain public offices; you cannot promote, form or manage a company without the court's permission; and you cannot trade in any business under any other name unless you inform all persons converted of the bankruptcy.

It also becomes more difficult to obtain credit, and your credit is affected for many years after the annulment.

The Official Receiver - a civil servant in The Insolvency Service and an officer of the court - will administer your bankruptcy and protect your assets from the date of the bankruptcy order.

He will usually act as your trustee in bankruptcy. If you do not co-operate you could be arrested.

Credit Union will offer `viable alternative' for borrowers

LOAN sharks be warned - York Credit Union is being officially launched today, in a bid to offer an attractive alternative to high interest charging lenders.

Eight years in the making, this not-for-profit financial co-operative is owned entirely by its members and run by an elected, voluntary board of directors.

City leaders, including the Lord Mayor and Sheriff, will be at the credit union's launch at the National Railway Museum, which follows its authorisation from the Financial Services Authority.

The credit union, which is owned and controlled by its members, hopes some of its guests will be among the first to sign up.

They will be able to open share accounts in which they can place their savings. Members save into a common fund to create a pool of money from which loans can be made at competitive rates.

The first loans are expected to be available to members from August.

Only those who live or work within the city can join for a £1 fee.

Manager Mike Horncastle said one of its main aims was to offer a viable alternative to "loan sharks" and other high street and doorstep lenders.

Another aim is to provide access to financial services for people considered to be "financially excluded".

A credit union is one of the few financial institutions that has its interest rates capped, so people will never be charged extortionate rates.

At this year's budget the Chancellor set this cap at two per cent per month. York Credit Union intends to set an interest rate at 1.5 per cent. As reported in The Press, the National Lottery has also boosted plans to set up a `community bank' in the Selby area.

Volunteers forming the Heart Of Yorkshire Credit Union received a £4,550 grant by Awards For All, one of the Lottery's good causes distributors.

The grant will go towards publicising the scheme and promoting it to people across the Selby district ahead of its official launch later this year.

District councillor Melanie Davis said: "I know from working with families in Selby district what a difference it will make to the lives of many local people to have access to a savings and loans service that is safe, fair and transparent."

More than 150 people have pledged to join the credit union, which organisers hope will be running by July.

To get involved as a volunteer phone Nigel Currey on 01757 704892.

Members' benefits

o Free life savings and loan protection insurance

o A competitive rate of interest on loans

o No loan set-up charges, early redemption fees, compulsory repayment protection insurance, or other hidden charges

o Access to money advice

o The union is authorised by the Financial Services Authority and is a member of the Financial Services Compensation Scheme, which protects members' savings

Spent a decade paying back debts

A DEBT that got out of control meant York's town crier ended up owing four times the amount he originally borrowed.

After getting two business loans amounting to £3,000 more than 15 years ago, John Redpath then spent a decade paying them back - to the tune of nearly £12,000.

The 59-year-old, who has been the city's town crier for 16 years, has backed York Credit Union, with this warning to others: "Don't let what happened to me happen to you.

"It cost me about 15 years of my life. I paid it off. Nowadays people tend to make themselves bankrupt."

He explained: "In 1989, I needed to borrow £1,500, and went to what I thought was a well-respected lender.

"A year or so later I needed to borrow the same again and, as I was being visited by the lender's agent weekly, I used the same company."

But while John thought he would soon pay off the loan, what seemed a reasonable interest rate turned into a financial disaster.

His personal circumstances changed and he found it harder to keep up the re-payments, and could only watch as the interest increased each time he was unable to make a repayment.

"It took me ten years to pay off the loan, and I paid nearly £12,000 on a £3,000 loan. I couldn't believe this was happening to me, and it affected other areas of my life too."

He said: "If York had had a credit union then, I would at least have had an alternative to turn to. Knowing that the credit union will never overcharge me would have made a huge difference - and I'd have known right from the start what I would be paying in total.

"I really do support the credit union and its efforts to offer an alternative to lenders charging high interest rates."

Marriage break-up led to financial trouble

RACHEL LACY'S financial troubles started following the breakdown of her marriage - and ended four years and a £30,000 loan later when she accepted defeat and declared herself bankrupt.

The York mother, who is a familiar figure as the city's Ghost Festival organiser, has moved on with her life since that difficult decision - one she is determined never to face again.

"It was after I got divorced. I was trying to support myself and my daughter," she recalled. "We had a big three-bedroom semi-detached. At the time, I wasn't receiving any maintenance so I was struggling to pay the mortgage."

The house was bought under a shared ownership deal with a housing trust. Selling was not an option because the poor housing market would have resulted in negative equity, she said.

"Debts piled up. I struggled on, getting deeper into debt.

"I had no loans to start with, no credit cards. But in those four years I got into debts of £30,000 - a proportion of that was the house. I got to the point where I didn't see any way out."

She was advised to declare herself bankrupt, but did not "give in" for another six months.

However, she had taken out a £10,000 loan with a high street bank - nearly her annual salary - and was struggling with the repayments.

"Once, I missed a payment. I was charged. But the charges were so high I couldn't pay both the payment and charge with one pay cheque. It was the loan that sank me."

Feeling "physically sick", she declared herself bankrupt.

"Although it was a relief, there was a feeling of guilt and: `Why should I be allowed to just walk away from my debts when so many others can't?' It didn't seem fair. But I felt I didn't have a choice. I was evicted from my house. It was the only home my daughter remembered. And they shut my bank account down."

Rachel secured a new account with another bank - one where her debit card is rejected if there are insufficient funds.

"I don't have a chequebook. It [bankruptcy] removes you from a lot of avenues of credit but you live without it. I am grateful. It is a situation I never want to find myself in again.

"I have always been honest with people about it. I am not proud of the fact that I went bankrupt, but I don't hide it."

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