More young people seek bankruptcy

An increasing number of under-25s are being advised to declare themselves bankrupt as they struggle to keep up with repayments on loans and credit cards, a leading debt advice charity has said.

The Consumer Credit Counselling Service (CCCS) yesterday said it had seen a big increase in the number of young people asking for help and in the size of the debts they faced.

Until 2003 only 6% of the charity's client base was made up of people aged under 25, but in 2004 that figure increased to 15.2%. Of the clients seen so far in 2005, 12.6% have fallen into this age group.

The average sum owed by under-25s seeking help has risen by around a quarter in two years, from £11,833 in 2003 to £14,984 in 2005. This is almost double the figure seen between 1997 and 1999, when the CCCS said cases involved an average debt of £7,667.

Typically the CCCS deals with cases involving borrowers in their mid-30s with a job, mortgage and children.

The average debt among this group is higher than among the under 25s, at £28,700, but in many cases younger borrowers are worse off because they do not own any assets and have little in the way of spare income to make repayments.

The result, said CCCS, is that it is counselling more young people to bankruptcy than ever before.

Frances Walker, a spokeswoman for the charity, said there were no figures for the number of under-25s to whom bankruptcy had been recommended, but that across all CCCS clients the figure was one in four, and many of these were thought to be younger people.

Ms Walker said before any recommendation was made the counsellor would look at the client's circumstances to establish whether there was any way they could repay their debts, and whether they would be putting their home or job at risk by taking this option.

"Bankruptcy is easier than it use to be but it is not a light option," she said.

Most people come out of bankruptcy after a year, but the fact that someone has been declared bankrupt remains on their credit record for six years, which could make it difficult to get credit during this period. If an ex-bankrupt is successful in obtaining credit, it is unlikely to be at the most competitive rate.

So far this year students have accounted for just 0.8% of young people counselled by CCCS, but Ms Walker said it was likely that student borrowing had fuelled the increase in the average debt.

This could be disguised in the figures because the option to defer payments for student loans means the debt is not a problem until the borrower has finished studying.

Earlier this year, an investigation by accountancy firm PKF showed that the under-30s now made up 60% of bankruptcies.

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