BARCLAYS yesterday denied speculation that it has several hundred million dollars of exposure to struggling esoteric debt vehicles structured by its investment banking arm.

It followed a report that claimed the highly-leveraged structured investment vehicles - known as SIV-lites - had run into trouble due to the turmoil in global credit markets.

A spokesman for Barclays said: "To say we have hundreds of millions of dollars of exposure to SIV-lites generally is inaccurate."

Worries this week have focused on a SIV-lite structured by Barclays Capital for stricken German lender SachsenLB, which is being sold to rival LBBW.

The Barclays spokesman said yesterday that it had provided no funding so far for the vehicle, Sachsen Funding 1.

A source familiar with the structure said Sachsen Funding 1 includes a facility whereby Barclays can be tapped for cash if the vehicle runs into trouble - but there is a cut-off limit for help.

Royal Bank of Scotland credit analysts said in a note yesterday: "Typically Barclays is a liquidity provider to the SIV-lites it has structured and it appears that Barclays is able to withdraw its committed credit line should the [net asset value] of the SIV-lite fall by more than 10 per cent.

"[It] remains debatable whether Barclays would actually do this and regardless the exposure it retains is material."

Worries about SIV-lites come after a turbulent week which saw the resignation of BarCap's, Edward Cahill, whose team has been instrumental in developing SIV-lites.

Rating agency Standard & Poor's has only rated five SIV-lites, downgrading two steeply and putting two on negative rating watch - all four of the negative ratings having been arranged by BarCap.

Worries over Barclays' exposure to SIVs comes as the bank nears the end of the takeover battle for Dutch bank ABN AMRO - with its falling share price potentially fatal to efforts to secure the biggest banking takeover to date.

Barclays shares closed down 3.6 per cent at 589p.



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A record 120,000 people in the UK will file for insolvency during 2007 KPMG has predicted, following official figures showing insolvency rose 28% in the second quarter.

The claim follows Insolvency Service figures showing that 113,439 filed for protection in the three months to July, down 8% on the first quarter but substantially up on 2006.

Individual Voluntary Agreements (IVAs), which allow debtors to write off part of their debt and which have risen sharply in recent years, fell 15% over the quarter.

The number of IVA applications rejected by lenders rose to 18%, an increase of almost 50% compared to the second quarter of 2006. Bankruptcies fell slightly to 16,258.

Associated indicators of financial difficulty continued to rise however, with County Court Judgements and home repossessions continuing an upward trend.



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THE number of people declared bankrupt in Edinburgh has soared to almost ten a week, as rising interest rates start to bite.

Debt management experts today warned the problem will worsen as homeowners come to the end of fixed-rate mortgages and house prices stabilise.

Lenders are also being blamed for "exercising their muscle" by forcing people into court to be declared bankrupt, rather than letting them pursue voluntary insolvency.

The number of people declared bankrupt in the Capital has nearly doubled in two years. In the most recent financial year, there were 467 bankruptcies in the city, compared to 364 a year earlier.

Most cases involved people struggling with credit card or loan debts, although the figures also included a few sole traders. Until recently, spiralling house prices - particularly in Edinburgh - have allowed thousands of homeowners to release equity in their property to pay off other debts. At the same time, banks and building societies have been handing out massive mortgages to buyers.

But many home owners are now being hit by rising interest rate levels, currently at 5.75 per cent following five hikes over the past year, while a levelling-off of house prices makes it harder for owners to release enough money to cover their debts.

John Hall, chief executive at Edinburgh-based firm Invocas, which sees the bulk of its business stem from personal insolvency in Scotland, said: "There are a combination of reasons for the rise. Increases in utility bills, and the effect of rising interest rates are starting to be felt.

"Around 60 per cent of homeowners have fixed or discounted deals, so it takes much longer for the effect of interest rate rises to come through nowadays.

"Many people may not think quarter-of-a-percentage rises are very much, but when they come to the end of their mortgage term, their interest rate could increase from four per cent to 6.75 or seven per cent. That's more than a 50 per cent rise, and could result in monthly payments rising from £800 to £1200."

In the three months to June, Mr Hall said Protected Trust Deeds (PTDs) - a confidential arrangement between an individual and his or her creditors - had dropped by 15 per cent year-on-year, while the level of sequestration had risen by 23 per cent. A PTD can write off up to 90 per cent of a person's debts, and if they keep up the affordable monthly payments, they can be debt free usually within 36 months.

But if someone is declared bankrupt, they will struggle to open a bank account, get a credit card, and their financial difficulties will be announced in public.

"Lenders are exercising their muscle and have been objecting to people going down the voluntary route, which forces them into the court process," Mr Hall said.

A spokesman for the Citizens Advice Bureau Scotland said bankruptcy was "not an easy option".

But he said: "Debt is now the single biggest issue that the Bureau deals with. We are the most indebted nation in Western Europe.

"For many people, bankruptcy is the only option because they will never be able to repay their debts."


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KPMG has said that the number of personal insolvencies fell during the last quarter but has warned that longer-term trends paint a bleaker picture.

The number going into insolvency in the 12 months to June 30th actually rose by 28 per cent compared with figures from 12 months ago, the firm noted - but that doesn't mean that all is lost for such Britons, however bad the state of their unsecured loans.

A tricky financial position could be helped by the availability of bad credit second mortgage loans, for example, with even really bad credit now able to be worked around by some lenders.

"These figures are a clear indication that more people are struggling to manage their financial affairs," commented KPMG head of personal insolvency Steve Treharne.

One thing everyone is agreed on is that it's best to seek bad credit help if that's an issue that could cause a problem in the future.

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Many people in the UK are in control of their debt and sensibly manage their finances every month, an industry expert has claimed.

Figures suggest that the gross domestic product (GDP) of Great Britain will hit £1.33 trillion this year, slightly less than the current levels of outstanding consumer debt on things like mortgages, credit cards and personal loans.

However, Julia Dallimore, the marketing director at Picture Financial, said that people should not necessarily view high levels of consumer borrowing as a bad thing.

She explained: "Many of us use our borrowing as an acceptable means of maintaining our standard of living.

"Our UK credit levels may seem high but with the vast majority of this taken up by mortgages and other secured lending we are increasingly spreading our credit repayments over longer periods to better manage our monthly finances."

However, Ms Dallimore said that rising interest rates meant that people could find themselves increasingly stretched with their borrowing.

"In these circumstances it is important for people to ensure that they review their credit arrangements and, if necessary restructure their borrowing to allow themselves greater financial freedom each month," she added.

However, figures from the Insolvency Service show that over 10,000 people in the UK were unable to manage their finances and had to seek an IVA in the second quarter of 2007.


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It is becoming tougher for people with debts to obtain IVAs, an industry expert has said.

Derek Oakley, an insolvency director at Debt Free Direct, said that some lenders were denying people IVAs even after a debt agency had concluded that this would be the best tool for the individual to manage their debt.

Mr Oakley explained: "What's much harder now is the attitude of lenders who are not as helpful in agreeing IVA deals and are becoming much, much tougher.

"[They] are denying access to an IVA, which we've assessed as the best solution for people, to quite a broad range of people and it's usually the people who need it most."

In addition, Mr Oakley explained that many people found themselves in need of an IVA because of "poor decisioning".

He said that this meant that people were unable to "assess the impact of decisions they're making or the borrowing decisions that they're making and whether they're able to afford things".

Recent figures from the Insolvency Service showed that over 10,000 people took on an IVA in the second quarter of 2007

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THE past few years have been lean ones for those who feed off corporate carrion. Now, as credit markets creak, distressed-debt investors—known less kindly as vulture funds—are confident that their time has come at last.

Many can claim to have seen the rout coming. Private Equity Intelligence, a research firm, calculates that vulture funds raised $15.6 billion in the first seven months of this year, more than the $13.9 billion they garnered in all of 2006, itself a record. A further $30 billion is in the works, including a giant $20 billion fund being pieced together by Goldman Sachs.

Nothing gets vultures squawking louder with delight than a wave of forced selling. This week Thornburg, a property firm facing funding difficulties, sold an array of top-notch securities worth over $20 billion at a 5-10% discount. Highly leveraged, computer-driven “quant” funds are having to liquidate shares, bonds and anything else they can sell in order to meet margin calls from their prime brokers. As markets tighten, creditors will also be less willing to refinance wobbling companies. That could mean an imminent end to the bankruptcy drought.

While some hedge funds suffer, others are poised to snaffle up bargains. Citadel, Ellington and Marathon Asset Management, among others, have both the ready cash and the inclination. Citadel traditionally keeps more than a third of its assets in cash or liquid securities, allowing it to pounce when opportunities arise. It recently took over a chunk of Sowood Capital, a rival that buckled under bad bets.

If the past is any guide, spectacular returns beckon for some. John Mauldin, publisher of an investment newsletter, points out that during America's 1980s savings-and-loan crisis, bottom-fishers could net perfectly good mortgages for 15 cents on the dollar.

Two skills will be particularly useful: spotting the gems in the rubble, and timing. An investor who pays 90 cents on the dollar for debt that is almost certain to be repaid can make mouth-watering returns with minimal leverage. But after WorldCom's collapse, many would-be vultures swooped too early, tearing into the discounted bonds of cable and telecoms firms, only to see them tumble further.

Ironically, the very firms that helped to inflate the credit bubble are now among the keenest to profit from its bursting. Blackstone and TPG, two of the biggest sponsors of leveraged buy-outs, both have distressed-debt funds, and Blackstone has expanded its already big restructuring unit. Private-equity firms are even looking to buy debt in each other's deals at a discount, says Martin Fridson, an independent credit analyst.

Experience counts for more in busts than in booms. So no one was surprised when Wilbur Ross, who earned a fortune buying up failed steelmakers, made an “initial foray” into subprime mortgages this month, offering $50m to a bust lender. Warren Buffett is also sniffing around, armed with a cash pile approaching $50 billion. When the price is right, he told the Wall Street Journal this week, “I can spend money faster than Imelda Marcos.” Unlike the Philippines' former first lady, however, he will be looking for weather-beaten shoes in need of a shine.


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Britain's live-now-pay-later culture has left the amount owed on consumer debt exceeding the annual output of the economy for the first time, experts in insolvency reveal today.
A report by the consultancy firm Grant Thornton found that debts on mortgages, overdrafts and credit card balances had risen to £1,345bn - higher than the UK's 2007 expected gross domestic product.

The firm said it would take the UK until January 5 next year to generate enough goods and services to cover what consumers owe. "Fortunately, most consumer debt is secured and can be repaid over several years, otherwise we would be technically bankrupt," said Stephen Gifford, Grant Thornton's chief economist. "Britain's huge level of consumer debt is symptomatic of the country's well-established buy-now-pay-later culture. We can no longer generate enough GDP to cover the amount we owe."


The Grant Thornton research coincided with the release of another survey showing that around 7% of adults - an estimated 2.5 million - are "very concerned" about their ability to keep on top of their debts. Research from MoneyExpert.com found that a quarter of consumers have added to the amount they owe over the past three months, with around one in 14 increasing their borrowing by a fifth or more.
Grant Thornton reports that the date when the UK could cover its borrowings was coming later in the calendar. In 1997, the year the present government came to power, the sum of individual mortgage and personal debt stood at £503bn and GDP was £786bn. In the subsequent 10 years, the date when the UK generated enough GDP to cover its debts had moved from August 23 to January 5.

Of the £1,345bn, almost 85% was secured against property - a similar proportion to that recorded in 1997.

Over the past 10 years personal insolvencies have risen from 24,000 in 1997 to 107,000 last year and there is concern that the five interest rate increases since August 2006 will mean the 2007 total will set another record.

"It's not uncommon these days to see some individuals with unsecured debt upwards of £50,000 spread across four or five credit cards and a mortgage on top of that," said Mark Allen, a partner in Grant Thornton's personal insolvency practice.

"These are the sort of people walking a perilous financial tightrope. All it takes is an increase in costs or, as is the present case, a rise in mortgage premiums to force people to default."



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TWO-THIRDS of borrowers have unrealistic expectations of how long it will take them to get out of debt, a survey showed.

The average borrower has £11,000 of non-mortgage debt and thinks they will be able to clear this within three years, according to financial website Fool.co.uk.

But the group said that with most people paying only around 13% of their salary towards their debt, it was likely to take 66% of people an average of seven years and seven months to get back into the black.

It added that repaying debt at this rate would mean that people would end up paying back £167 for every £100 they borrowed.

More worryingly, one in five people with debts of more than £20,000 admitted they could not afford to make any repayments at all at the moment.

David Kuo, head of personal finance at Fool.co.uk, said, “It is worrying to learn that two out of three people have taken on debts without fully understanding what is involved or how long it will take to repay the loan.


“For many, borrowing money is as easy as walking through a doorway. But it’s a good idea to ensure that you have a way out before the door slams shut.”

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Former Halifax Town chairman Geoff Ralph has warned that the club is facing the threat of closure.
Ralph, who is still a director at the Shay, has revealed that they could go into liquidation next month unless a proposed takeover comes to fruition.

He told the Courier: "I'm hoping the deal can be done but as time drags on I can't pretend I'm optimistic.

"If anyone else came in with an offer I would have no alternative but to embrace them on behalf of the club."

Ralph added: "I am sorry to be the bearer of bad tidings but I could not face the fans if the club had gone under and I'd said nothing."



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So much has happened over the past few weeks regarding creditor demanded changes to the way Individual Voluntary Arrangements (IVA) are to be withheld from consumers in financial trouble that I thought it would be a good idea just to take a quick look at the fundamental issues of the situation.

For those readers not from the UK, an Individual Voluntary Arrangement or IVA is designed to be a fair, reasonable and sustainable way for people to be able to create a binding debt repayment plan when they are facing financial troubles.

The intention of the IVA is to distribute funds in a pro-rata, fair fashion, and to give creditors a chance to review the proposal on its merits and have an opportunity to cast a vote. Using a majority voting formula the approved IVA becomes binding on all creditors. The consumer then makes one monthly payment and at the appropriate time, the funds are distributed to the creditors.

An IVA is prepared by a licensed and regulated Insolvency Practitioner (IP). IPs are generally accountants or lawyers with additional education and certification that strive to create fair repayment proposals for both the debtor and the creditor. IPs provide a detailed and professional service and are properly compensated for that service from the funds that are pooled during the three to five year repayment period in the IVA.

The benefit of the IVA to the debtor is that it stops collection activity, binds all the creditors to the repayment plan created by the IP, distributes available funds in a fair and reasonable way to all creditors and allows the debtor to make a “best effort” to repay their debt without going bankrupt. Also, the fixed time of the IVA gives the debtor some clarity as to how long it will take to get out of debt.

As I write this, six bad actors in the credit world have intentionally determined that they do not think consumers should have either a voice or access to an IVA. These six creditors, HSBC, Halifax / Bank of Scotland, Royal Bank of Scotland, Marks & Spencer Money and First Direct (The Insolvency Exchange collective) and Northern Rock have “unilaterally” decided that consumers are not entitled to be treated fairly and that they, the creditors, will impose their will to manipulate the process to best serve their profits.

This manipulation has come in several coordinated attacks. The first front is the intentional policies to place mandatory fee caps on the very Insolvency Practitioners that are charged with putting together the IVA proposals for voting. Creditors have attempted to make villains out of IPs because of the fees they charge.

We cannot lose sight of the fact that Insolvency Practitioners are professionals that are subject to the complexities of regulation, licensing, accountability and fair service. If we are to demand regulatory compliance and accountability from IPs, then that all comes at a high administrative cost. To serve both creditors and consumers fairly the Insolvency Practitioner has to jump through all sorts of hoops and over the years, this has become harder, more complicated and more time consuming.

Long gone are the days when an IP could put together an IVA repayment plan and submit if for simple voting. Today the creditors are either reluctant to vote, flat out don’t vote or return proposals with a set of modifications that have to be made and that process adds yet more time and complexity to the case. Time is money.

Creditors today, and not just the six I named above, you know who you are, have fallen into a routine of assuming they can demand and dictate whatever pain and injustice they want to put the debtor through, a debtor whose sole intention is to repay their debt in a fair way. It is very possible that Insolvency Practitioners in the past have gone along with these growing lists of demands and modifications because what’s one more little change to help the debtor find a solution.

So the reality is that the only reason the consumer wants to put forward an IVA is so they can repay what they can afford to rather than go bankrupt. But this IVA processes has become mutated not by logic, but by the whims and wishes of the collection departments of creditors that find the process does not make their work convenient or creates a process that places the consumer under protection and outside their grasp.

The recent written demands of the Insolvency Exchange and their posse of five creditors has created a written policy where the creditors have officially created a policy of determining how much IPs can charge and how the IPs will change the way they run their insolvency practice to best suit the creditors.

Around the conference tables of the creditors, that policy makes perfect sense if we are to change society to only care about making their profits and jobs better. But that is not what the IVA was designed to do.

When creditors tie the up-front fee they can charge to the size of the debtors monthly payment, that policy seems to be designed to poke IPs to be rewarded by proposing higher monthly payments that serve the creditors, rather than proposing fair, reasonable and sustainable monthly payments that are realistic and can be afforded by the debtor.

The demanded price-cap on IP fees forces Insolvency Practitioners to earn that a lower initial fee simply because the person has less ability to repay, not because the situation is less complicated. Yet the time, liability and work that takes place for a low monthly payment debtor, by the IP, is often more than for a higher payment debtor. Creditors are saying, with their written policies, that these lower payment debtors are cast-offs and don't deserve to be treated with the same care and compassion as other people.

The lower payment debtor is typically a member of our society that is more marginalized, less safe, more at risk of having a single catastrophic event place their entire financial lives in ruin. These debtors are often single parent homes, families that are underearning, and younger or elderly debtors that have found themselves in trouble.

So when creditors intentionally create and demand a policy of tying the professional fees of Insolvency Practitioners to the size of the monthly payment the creditors would like for them to extract, it creates a policy of excluding approximately 50% of debtors from the IVA process since IPs won’t be able to afford to provide service to those debtors.

Next, creditors are demanding that IPs make investments in technology and payment distribution to make the life of the collection department easier. These investments come at yet another cost to the IP.

Creditors are also demanding that IP compensation when the plan is in place is directly tied to monthly payments collected from the debtor. This attempts to force IPs to become “hired gun” debt collectors for the creditors and further erodes the professional status of the IP as a fair and reasonable professional provider. IPs do not need to be forced “debt collectors” for the creditors. They should be fair enforcers and supervisors of the IVA agreed to between the creditor and debtor and render whatever assistance is needed by the debtor or enforce the IVA terms if the debtor is unable to reasonably comply.

Maybe rather than be incensed and outraged by the recent creditor demands that restrict access to the IVA, tie professional fees of IPs to collection quotas, and leave disadvantaged consumers excluded from a fair, reasonable and sustainable way to repay their debt without going bankrupt, maybe we should take three steps back and just go back to basics.

Maybe it is time to return the IVA back to its roots and remove all the silly modifications and force the creditors to vote out of the IVA proposal instead of having IPs practically begging creditors to vote so people can repay rather than go bankrupt.

Maybe it is time for the Insolvency Service to have whatever legislative tools they need to return the modern IVA back to the process that was intended when it was created so that we never lose sight of the fact that while having access to credit can be a beneficial part of our modern society, so is the right for people that are struggling under painful debt to have a fair and professionally represented opportunity to put forward a reasonable repayment plan in case they accidently find themselves in trouble.



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More news on Individual Voluntary Arrangements and the control of the IVA
Just when the allegations of Individual Voluntary Arrangement (IVA) price-fixing, collusion, cartels and the like were flying around about the Insolvency Exchange (TIX) and its beloved banking clients they dragged into this mess (HSBC, Halifax / Bank of Scotland, Royal Bank of Scotland, Marks & Spencer Money and First Direct), there is yet another wrinkle.

Apparently ASDA (part of the WAL*MART family that is falling out of favor in the US for treatment of employees and suppliers) and Tesco are under investigation by the Competition Commission for pressuring suppliers to cut prices. The UK’s large supermarket companies have been issued Section 109 notices and ordered to turn over about 11 million emails under the investigation. The only thing that could put the situation with the supermarkets and the Insolvency Exchange closer together would be if ASDA and Tesco were intentionally blocking consumers from having access to the fruits and veg they needed for their good health.

The Sunday Telegraph has the big story on this relevant news. The article includes the following information:

“The nature of such communications, effectively putting the suppliers "over a barrel", contravenes a code of conduct the retailers have signed.”

“Suppliers have become concerned over the retail chains demanding ever-lower prices, threatening the viability of their businesses and putting some - especially farmers - on the brink of ruin.”

"We believe that this kind of intimidation by the big supermarkets is widespread and are glad that the Competition Commission seems to have unearthed evidence of this as smaller suppliers are so often reluctant to speak out.”

"Mark Prisk, the shadow minister for business and enterprise, said: "It is critical that the big supermarkets understand that all business must be conducted in a free and fair way, and that abuse of the system, particularly against the smaller suppliers, is completely unacceptable and must be challenged."

If TIX and their clients can’t see the similarities, they are can only be in complete denial, ironically one of the stages of death and dying. I’m sure the TIX clients have already entered the second stage, anger. Unfortunately it is probably just anger that Insolvency Practitioners won’t be quiet about their demands for fair treatment of consumers. Who knows, maybe the banks are even angry about the situation TIX has placed them in?

Thankfully we don’t have to dig too deep to uncover the evidence that the Competition Commission will be reading in the near future when they say “What the f*** were they thinking?” TIX made the job very easy when they issued the TIX burning bush memo, as I call it. I'm sure the Competition Commission will also be interested in the feedback from Insolvency Practitioners from the recent survey.

In case you wanted to contact Mark Prisk and tell him about these issues of organised creditor denial of IVAs to consumers, organised control of prices from IP suppliers, and blatant ignorance of the Banking Code, contact information is online.

Who knows, maybe Mark and his staff would like to sign the Mike Reeves petition requesting that 10 Downing Street to wake up and look at this issue?


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As levels of debt rise more and more people feel trapped. Many businesses fall because they simply don't see a way out.

We can help. We can help reduce your debts to a manageable monthly payment and even write off a percentage. The scheme is called a Company Voluntary Arrangement or CVA. It is a government scheme set up to help prevent companies liquidating or bankrupting due to debt.

To qualify all you need is £15,000 of unsecured debt or more. A CVA runs for 5 years and after that time anything you can't pay is simply written off. The monthly payments are tailored to be affordable to your company to help you take back control. A CVA is also a legal agreement so no legal action can be taken against you by anyone you include in the agreement.

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Business owners are being told not to panic but to prepare for tougher times ahead, according to accountants and bankers.

Competition between high street banks and specialist lenders remains strong, which should keep a lid on the cost of debt for small and medium-sized enterprises. The short-term impact may even be good for business owners if an expected quarter-point rise in the Bank of England base rate is put on hold because of market turmoil.

Steve Jennings, director of business banking at Alliance & Leicester Commercial Bank, said events had had no effect on his company's lending practices although A&L had always operated a "strong" credit policy.

That is not to say that some businesses will not feel pain. Henry Edjelbaum, managing director of ASC Finance, a specialist finance business, said: "The market was flush with cash and a lot of banks have thrown money at clients, cutting corners galore."

There is no single solution for those facing a credit squeeze beyond talking to your accountant. "The golden rule is that the first loss is always the cheapest so, when things go bad, the sooner you address it the better."

The overall drop in share prices will hit businesses still offering final salary pensions. However, only 2-3 per cent of SMEs still run such schemes, according to Howard Hackney, a partner at Grant Thornton, the accountancy.

Owner-managers about to retire might have to delay their final day if a significant amount of their retirement funds was tied up in shares.

The bigger concern for businesses should be the effect on customer confidence. "If the market goes down, it is usually a year or two in advance of a hiccup in the economy," said Mr Hackney.



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THE amount of debt passed to collection agencies has tripled in the past six years to £21 billion, with more than 20m individual cases being handled in the past year alone.

The increase underlines the sharp rise in personal indebtedness in Britain, and a growth in the use of collection agencies to recover bad loans.

A report by the Credit Services Association (CSA), which speaks for 291 debt collection companies, found that of the £21 billion, £6 billion had been sold on to agencies for collection.

Godfrey Lancashire, CSA president, said there was a growing tendency by lenders to sell loans to collectors.

“Traditionally the work was on a commission basis � the collector would keep 25% to 30% of the debt if they were able to collect it.

“Now the growing trend is for the lender � which is normally a financial institution � to sell the debt to the collection company. They will normally buy it for around 90p in the pound, and make their margin from their success in collecting the full amount,” Lancashire said.

Debt collectors found more people were moving house in order to avoid debts.

“The survey indicates that of the 20m cases handled last year, at least 1m were ‘gone-aways’, and the figure could well be higher than that,” he said.

The debt-collection industry holds its annual conference next month. Delegates are expected to call for a relaxation on access to identity records to help them pursue people attempting to evade debt.

“The government has moved the bias too far in favour of the consumer � in this case the borrower.

“People tend to think of the losers being large, faceless corporations, but it can just as easily be a small businessman or a single mother missing out on child-support payments,” Lancashire said.

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A CARE home which shut down and gave elderly residents just six hours to leave has been put up for sale for £1.3million.

Brightcrest Ltd, which ran Astley House in Whitehall Road in Darwen, shut the home on May 29 blaming debts of almost £300,000.

But at a liquidation hearing in June it was revealed that £283,656 of the debt was owed to landlord Jason Management Ltd, which is owned by Brightcrest Ltd's majority shareholder, Professor Mohammed Iqbal Memon.

Some £15,181 is owed to nine other creditors, including £4,752 to Blackburn with Darwen Council and £194.73 to Careshop Limited of Bolton, but the council has said it is unlikely it will ever see its money again.

Stephen Sloss, director of adult social services at Blackburn with Darwen Council, said: "We are advised that any action we took would have to be against the company, which is now in liquidation. For that reason, there is no point in pursuing it."

At 2pm on May 29, the families of 15 women, all of whom suffered from Alzhiemer's disease and dementia, were told that Astley House would close at 8pm the same day. Great-grandmother Alice Elsworth, 84, died just days after being evicted.

Selling agent Savills Healthcare advertise the care home as open to offers in excess of £1.3million and say it is a retirement sale after 22 years ownership'.

A new owner would also have to spend an extra £250,000 on delapidations.

When the company went into liquidation it was revealed that, of Brightcrest Ltd's debts, some £250,000 was needed towards the cost of building delapidations.

The advertisement says planning permission exists for a 57 bed care home. That includes building a 36-bed care home in the grounds and utilising the 21 beds in the existing building.

It suggests potential exists to create a larger care home with 60 to 70 beds subject to planning permission.

And planning permission is available to convert the care home into provide nine apartments and build a 36-bed care home in the grounds.

Prof Memon, of Darwen, was unavailable for comment.

A previous statement issued by him through his solicitor said: "The reason for the financial problems of Astley House was a significant drop in occupancy levels over a lengthy period of time and a number of very significant bad debts.

"Unfortunately it was not possible to give residents more notice as it would have been against the law for the company to continue trading once it was insolvent."

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TV adverts may be annoying, but, in finance, they are a very useful sign of products to be wary about.

When you see a product being advertised aggressively (i.e. frequently and everywhere), it means that it has a large marketing budget. If it has a large marketing budget it's because it makes them a big fat profit. Even bigger than most of their other products, I mean.

If a product makes them their biggest, fattest profits then it is probably not a good product for you -- it is over-priced.

There are exceptions, such as advertising 'loss leaders', which are especially cheap products that rope you in to buying more expensive ones. But financial companies tend not to advertise in this way; they usually just make their expensive products sound fantastic. So being wary of any products you see advertised a lot is my rule of thumb.

Secured loans are a good example.

Recently, the Consumer Credit Counselling Service said that the biggest problem for borrowers today is no longer credit cards but secured borrowing and the rising cost of mortgage debt. And it would know, as it speaks to thousands of debtors each month.

Credit cards are always a problem, with their very high interest rates and ridiculously low minimum payments, which encourage greater volumes of debt.

And many mortgage borrowers have been hit by rising interest rates which may have been a surprise for some.

But, more and more, secured loans (I'm not talking mortgages at present) are being aggressively and irresponsibly marketed for all sorts of uses. The worst combination is a secured loan that's been used to consolidate credit-card debts. The Fool has found in the past that five out of six borrowers who do this go on to rack up further debts with their now 'empty' credit cards!

In my view, secured loans are rarely the cheapest or best way to fund your debt.

What's more, secured loans are often taken out over a long period which increases the total cost. An unsecured loan at 10% interest (you can get them for 6-7%) for £10,000 over five years costs about £2,500 in interest. Yet a secured loan of 10% over 25 years roughly costs an enormous £12,500 in interest, or more than double what you borrowed.

Keith Tondeur, national director of the money education charity Credit Action, said that for the people who contact them with serious debt problems, secured loans are suitable only 3% of the time.

Really, secured loans are most likely to be suitable for wealthier people with large disposable incomes who want finance for big improvements to their homes, or something similar.

However, every single time I've studied cases to see whether a person's finances would best be optimised with a secured loan, I've always found a cheaper and better alternative. I'm sure that secured loans have a place, but I believe they're not for the majority of borrowers. If you look hard enough, most of you will find much better ways. Things to look for are:

Fixed interest. Most secured loans have variable interest, but most unsecured loans have fixed rates of interest, which makes it easier to budget.

Shorter loans. If you have a longer loan, you'll pay a lot more interest. It's much better to try to pay off your debts sooner. On a related note, adding debts to your mortgage may seem cheaper because of the low interest rate, but over the length of your mortgage you'll end up paying lots more, so be careful there too.

Make overpayments. If you're lucky you should be able to find unsecured loans that allow you to overpay when you can. This cuts the length of the loan and can massively reduce the interest you pay.

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The Debt Resolution Forum yesterday warned that there could be an "explosion" in the number of reported bankruptcies and a debt crisis if lenders continued to block debtors from obtaining individual voluntary agreements (IVAs).
The Debt Resolution Forum (DRF), represents 28 of Britain's IVA firms. IVAs enable those with large debts to reduce their repayments by reaching an agreement with banks which have lent the money. The banks have become increasingly wary of granting IVAs.

The number of IVAs taken out fell by 15% between April and June. Chris Holmes, DRF chairman, said this was a result of "artificial barriers and hurdles" imposed by banks and credit card companies "leading to hundreds of clients ... being advised that an IVA is no longer possible for them," rather than lack of demand.
Colm Duffy, senior partner at McCambridge Duffy, said he had seen bank IVA rejections rise from 2.5%-3% before what he perceived as a change in creditors' attitudes, to 15% "though this is lower than the industry average".

Under the rules of accepting IVA status, over 75% of the creditors must vote in favour of the debt solution for the IVA to be valid. This means that if banks oppose the deal, they can block it.

Personal debt has increased rapidly in recent years as credit has become easier to obtain. This has seen some people struggle to repay credit card debt and bank loans. The Insolvency Service recently said there were 26,956 individual insolvencies in England and Wales between April and June, a decrease of 8.1% from January to March this year, and an increase of 4.2% on the same period last year.

Mr Holmes accused creditors of being "inflexible" and not taking into account the interest rate rises and increasing costs of living. People currently emerging from two-year fixed-rate mortgages could see payments increase by 50% and British consumers already owed more than £1 trillion, he said.

Banks have recently been arguing that IVA returns are too low. Individuals with IVAs make reduced payments towards their debt total during five years, after which the debt is settled. Creditors, therefore, do not receive the full amount of the debt and can get as little as 30% back.

Fees received by insolvency practitioners - individuals required to set up an IVA - have also been criticised by creditors as many practitioners take fees up front, allowing them to make a profit whether the IVA is completed or not.

Mark Hover, head of The Insolvency Exchange (TIX) which represents HSBC, HBOS and Royal bank of Scotland, First Direct and Marks & Spencer's Money, denied banks were making it more difficult for debtors to access IVAs.

"Our acceptance level has been fairly consistent over the last six months [with] about 80% being accepted."

TIX has sent out two letters to insolvency practitioners stating it believes practitioners should receive the first four or five payments upfront and 15% for each payment after that.

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Thousands of students may go bankrupt after accumulating huge debts at university, according to a study today.

An estimated one in 10 could be declared insolvent after borrowing thousands to pay for tuition fees and accommodation, it is claimed.


One in 10 students could be declared insolvent after borrowing thousands to pay for tuition fees

The study also warned that students are facing an 11-year "debt sentence" due to the increased cost of going to university in Britain.

The majority of undergraduates are preparing to get paid work to keep debt levels down, even if it means missing out on lectures.

The findings will fuel concerns over the long-term financial difficulties faced by students due to the Government's higher education funding regime imposed last year. For the first time, universities were able to charge £3,000-a-year in tuition fees, compared with £1,250 a year earlier.

The near tripling of fees, coupled with spiralling rents and increased living costs, means thousands of students will have to borrow record amounts, take paid work or rely on parents to cover the cost of a three-year course.

As 200,000 sixth-formers prepare to start university this year, uSwitch.com, the price comparison website, said students face total debts of £3.2 billion, almost three times that of 1997.

Over the past decade, graduate salaries have increased by 51 per cent but student debt has increased by 167 per cent, forcing almost one in 10 to consider bankruptcy as a solution, says the study.

Mike Naylor, the website's personal finance specialist, said: "More money than ever is being borrowed by students to fund their way through university, with some starting work with debts of up to £30,000. It is inevitable that this will have a knock-on effect on their lives."

A separate survey of 2,000 students by Push.co.uk, the university guide, found that undergraduates who started last year can expect to owe nearly £17,500 by the time they leave.

Debts for students in England have risen by a quarter in the past 12 months and this year's freshers will owe up to £21,500 by graduation, says the study.

The National Union of Students warned that middle-class students, who are ineligible for new means-tested grants and bursaries, are so heavily in debt that they are putting off buying a home or starting a family.

A third survey of more than 3,000 graduates, undergraduates and sixth-formers by NatWest found that 82 per cent of students preparing to start courses in September will look for paid work while studying.

The Department of Innovation, Universities and Skills insisted debt levels were not deterring people from higher education, with numbers expected to be up on 2006.

"A generous package of support is available to students, particularly those from low-income families, who can receive maintenance grants of up to £2,700 per annum," said a spokesman.

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Nearly half of all people applying for bankruptcy are women for the first time ever, according to research by MoneyExpert.com.

While celebrities like Jordan are spending millions on holiday homes abroad, the UK’s debt has risen to more than £1.1million, and more and more of those feeling the strain are women.

In 2000, 32 per cent of those going bankrupt were women, now the figure is 48 per cent, and it is expected to keep climbing.

MoneyExpert.com says: “Analysts believe more women are racking up unmanageable debts as they now feel more under pressure to maintain lavish lifestyles.

“They want to spend it like the Beckhams but don't have the income to sustain the debts they run up. More women in work believe they have to compete with men but they struggle because they're not paid as much.

“The gender pay gap is still massive with women earning less and that makes them more vulnerable to rising interest rates. Increasingly they have to borrow more to get on the property ladder - and if they live alone there's no one else to share the burden.”

Keeping debt under control is vitally important, says MoneyExpert.com – there are consolidation loans available, so that you can put all your debts in one place. If debt problems have already gone too far, the options are an IVA (Individual Voluntary Arrangement) or bankruptcy, but you should think very carefully before doing anything so drastic.

“With bankruptcy there are serious implications - you may struggle to borrow money in the future and have to have your spending monitored,” says MoneyExpert.com

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Young people are shouldering the highest level of unsecured debt in Britain, according to a new survey. Those aged 18-24 have unsecured debt of £20,396 – more than double the national average of £9,455 for all age groups. But they earn less than the national average wage - £20,396 against £30,508.

The findings were part of a national survey on debt carried out by R3, the Association of Business Recovery Professionals - an organisation which represents 97% of Insolvency Practitioners in the UK.

Patricia Godfrey, President of R3 said, “It is extremely worrying that our young people are so much in debt. Our survey sowed that in many cases they leave university in debt and struggle to pay it off even years later.”

Over half the people aged 18-24 said that student debt was part of the reason for their debt and over a third of those aged 25-34 said the same. Paying for specific items, such as cars and holidays was high on the list of reasons for debt build up, as well as overspending, unemployment and redundancy.

Six per cent of young people say their debt is causing them great difficulties and 1% say it is unmanageable.

Patricia Godfrey added: “It is clear that long before they go to university, young people need to understand the implications of taking on too much credit. This is why R3 is working with the IFS School of Finance to send some of our Insolvency Practitioners in to schools, with specially designed classroom exercises designed to educate children about the pitfalls of debt.”

R3’s members will be supporting the IFS School of Finance qualifications on Financial Capability from the next school term in September 2007.

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Until very recently, Britain’s attitude to the sub-prime meltdown in the US was: “It couldn’t happen here”. But worries are growing that echoes of the American experience could ripple across the Atlantic.

As two mortgage lenders, Unity Homeloans and Infinity Mortgages, announced yesterday that they were closing their sub-prime mortgage product range to all new business with immediate effect, Vince Cable, the Liberal Democrat Treasury spokesman, sounded the alarm over Britain’s culture of debt. “The stresses and strains now being seen in the USA and in Germany may well be felt in Britain before too long,” he said.

The cracks are starting to show. Last week the Council of Mortgage Lenders sharply revised up its estimate of home repossessions. The numbers are pretty low compared with the US, and are dwarfed by the experience of the early 1990s. What really got analysts nervous was the number of repossessions as a proportion of mortgage arrears. By the look of the CML’s data, nearly 40 per cent of mortgages in arrears now lead to repossessions, up from 12 per cent just three years ago. The figure is far higher than anything seen in the 1980s or 90s and suggests that sub-prime lending is a larger phenomenon than previously thought.

David Owen, of Dresdner Kleinwort, said: “Lenders in this area are not giving households who run into financial difficulties the luxury of several months grace. Think what could happen if house prices fell.”

However, house prices show little sign of falling. Unlike in the US, a squeeze on the supply of homes has underpinned prices. The massive levels of defaults on loans in the US are therefore less likely to come to Britain. In addition, the CML says that the wilder inventiveness of the US sub-prime mortgage originators never spread to the UK in the first place.

One man who remains sure that the problem is manageable is Mervyn King, the Governor of the Bank of England. This week he repeated that repossessions remained at a low level. The increase, he said, “doesn’t in and of itself at this stage constitute a major macroeconomic threat.”

But the absence, for now, of a large sub-prime problem in Britain does not mean that its stock market is immune to the problem. In fact, European banks such as HSBC and BNP have proved themselves markedly exposed to worthless mortgage-backed bonds and collateralised debt obligations.

Kevin Duffy, the managing director of Robert Sterling, the mortgage adviser, said: “We are seeing the contagion coming over from the Atlantic. The organisations lending that money in the US also have a stake-hold in the UK market so it is clearly going to have an impact. The question is also whether we are going to make it through the next few months without one of the big players withdrawing. That’s the $64 million question.”

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More than one million pensioners are facing a bleak financial future, research shows today.


Pensioners' average credit card and personal loan debt has risen by 42 per cent in the past year


One in five is yet to pay off a mortgage and one in three is racking up average credit and personal debt of £5,900.

With many people buying a home later in life and state pensions not keeping pace with inflation, there are fears the problem will only get worse.

A report from Scottish Widows paints a worrying picture.

The total debt of those over 65 has hit £57 billion, according to the investment company, while pensioners' average credit card and personal loan debt has risen by 42 per cent in the past year.

Kate Jopling, of the charity Help the Aged, called the figures "worrying".

"With one in five retired homeowners still paying a mortgage and one in five pensioners living in poverty, the future looks pretty bleak."

The data from Scottish Widows is the latest proof that the disparity in wealth between the UK's seven million pensioners has never been wider.

Many have retired with a comfortable company pension and no mortgage, but some are struggling to keep their heads above water.

Earlier this year, Help the Aged's annual report found that 20 per cent of older people avoided heating their bedroom, living room or bathroom, because of money concerns.

Inflation has hit pensioners particularly hard, eating into their savings and landing them with escalating weekly bills.

Research by Capital Economics for The Daily Telegraph shows that pensioners were hit by an inflation rate of nine per cent last year - more than double the official rate.

In recent months that figure has come down, but the average pension has failed to keep pace with rising living costs.

Ian Naismith, the head of pensions at Scottish Widows, said: "With more and more people taking out mortgages later, and paying them off later, we are seeing many people turning to the equity in their home as a method of providing income in retirement.

"The knock-on effect of getting on the housing ladder later is that money that could have been put into a pension is being used on monthly mortgage payments."

While the decade-long house price boom should have benefited homeowners now approaching retirement, many have been forced to use the value of their homes to help their children get on the property ladder.

Nigel Waterson, the shadow pensions minister, said: "Two million people are living in official poverty under this Government, but many more are struggling to make ends meet and at a time of life when they should be free from financial worry."

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A record number of people in England and Wales applied to become bankrupt during the 12 months to the end of June, according to official figures published on Friday.

The number of people asking to be made bankrupt has soared in the past three years as levels of domestic debt have risen sharply and people have begun to attach “less stigma” to becoming bankrupt, said personal insolvency advisers.



Bankruptcy petitions from debtors have increased five fold since they were running at about 10,000 a year during the mid to late 1990s. This compares with more 54,500 people who petitioned to become bankrupt during the past 12 months, according to the Ministry of Justice.

It reported that debtor petitions in the latest quarter were 5 per cent higher than in the same period last year, but 11 per cent lower than in the previous three months.

This was in line with separate figures published last week by the Insolvency Service, which reported an 8.1 per cent decline in the number of people declaring themselves insolvent compared with the first three months of this year.

There was also better news for banks on other fronts. According to the Ministry of Justice, the number of company winding-up petitions fell 5 per cent compared with the second quarter of last year, while bankruptcy petitions from creditors declined 4 per cent over the same period.

Mark Sands, director of personal insolvency at KPMG, warned that the recent declines were only a temporary respite. He said the state’s family finances were expected to worsen as the “impact of recent interest rate rises kicked in” and as fixed-interest periods for more than 1m mortgage loans ran out over the next 18 months.

According to KPMG, the average debt of people who become bankrupt is £46,587, and £48,800 for those pursuing individual voluntary arrangements.

Mr Sands said: “Despite the [overall] national fall in bankruptcy numbers, we can’t take comfort in this trend, which we see as being only a temporary respite from long-term increases to record levels.

“With average debt levels as high as this, five increases in interest rates in the last year, and a further rise on the cards, the pressure on the over-indebted continues to increase. It is unsurprising that we are seeing more and more people choosing personal insolvency as the solution to their problems.”

According to the Ministry of Justice, north-east England saw the biggest rise in the number of people seeking to make themselves bankrupt, with a 19 per cent increase in petitions during the second quarter of the year compared with the same period in 2006. This was followed by the north-west at 18 per cent and London at 17 per cent.

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We paraphrase. Nouriel Roubini, of RGE Monitor, actually thinks that this current market turmoil is “much worse” - not just worse - than the liquidity crisis experienced in 1998 following the LTCM episode.

Why? Insolvency versus illiquidity.

A liquidity problem occurs when a household, firm, country, etc is still solvent, but faces a sudden crisis, where a creditor is unwilling to refinance their claims for example. An insolvent debtor does not only face a liquidity problem, but could not pay the claims upon them over time, even if there were no liquidity problem. One, broadly, suggests sound fundamentals; the other very much not so.

LTCM, says Roubini, was mostly a liquidity crisis:

The US was growing then at 4% plus, the internet bubble had not burst yet, we were in the middle of the “New Economy” productivity boom, households were not financially stretched and corporations were not financially stretched with debt either….
Today we do not have only a liquidity crisis like in 1998; we also have a insolvency/debt crisis among a variety of borrowers that overborrowed excessively during the boom phase of the latest Minsky credit bubble.
[Minsky modelled asset bubbles driven by credit cycles whereby periods of economic and financial stability lead to a lowering of investors’ risk aversion and a process of releveraging. In this process, you’ll have sound borrowers, speculative borrowers, who can service only their interest payments and need refinancing to service their principal, and “Ponzi borrowers”, who can service neither and are banking on rising asset prices to keep on refinancing their debts.]

The real factors at stake in this unfortunate situation are, says Roubini:

“You have hundreds of thousands of US households who are insolvent on their mortgages. And this is not just a subprime problem: the same reckless lending practices used in subprime….were used for near prime, Alt-A loans, hybrid prime ARMs, home equity loans, piggyback loans.”
“You also have lots of insolvent mortgage lenders - not just the 60 plus subprime ones who have gone out of business - but also plenty of near prime and prime ones.”
“You will also have - soon enough - plenty of insolvent home builders. Many small ones have gone out of business; now it is likely that some of the larger ones will follow in the next few months.”
“We also have insolvent hedge funds and other funds exposed to subprime and other mortgages.”
Moreover, the recent widening in corporate credit spreads, says Roubini, is not a sign of a liquidity crunch. It is a sign that investors are realising that there are serious credit/insolvency problems in some parts of the corporate system.Low default rates, he says, have been driven in part by corporate profitability and robust balance sheets but also by easy credit. When the ‘hot money’ departs, historical patterns of default should reassert themselves.

This is not just liquidity crisis like in the 1998 LTCM episode. This is rather a liquidity crisis that signals a more fundamental debt, credit and insolvency crisis among many economic agents in the US and global economy…
… We are indeed at a “Minsky Moment” and this recent financial turmoil is the beginning of a much more serious and protracted US and global credit crunch. The risks of a systemic crisis are rising: liquidity injections and lender of last resort bail out of insolvent borrowers - however necessary and unavoidable during a liquidity panic - will not work; they will only postpone and exacerbate the eventual and unavoidable insolvencies.


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In view of the recent announcement by TIX and the response this has generated across the industry, The Insolvency Service would like to re-iterate our commitment to the principles expressed through the recent IVA forum. The attached sets out that commitment and our response to the recent developments.




--------------------------------------------------------------------------------

The Insolvency Service is concerned to note the line being taken by certain creditors and their agents in respect of fees charged by IPs in IVAs. It appears that some creditors are effectively refusing to vote in favour of IVAs where the fee is above a certain level. Whilst recognising that the decision as to whether to accept an IVA or not lies entirely with the creditors, we are very concerned that this revised approach runs the risk of denying some debtors access to a debt management solution which has been identified as the most appropriate solution for them, and for their creditors. The longer term effect could be to push more people into bankruptcy, where creditors would get an even lower return.
The Insolvency Service has been working with the British Bankers Association and with representatives from debtors, creditors, IPs and regulators, to agree a standard protocol for dealing with consumer IVAs. We recognise the efforts put into this process by many people from across the industry and we believe that considerable progress has been made towards this goal, which will ultimately drive down costs and increase transparency. The last IVA forum, held in May 2007, involved over 170 interested parties and demonstrated widespread agreement and consensus on many issues. We hope that the recent developments will not halt that progress.

We believe that the IVA is an effective debt management tool. Further, we believe that the creation of a protocol for dealing with so called “consumer IVAs” is an effective means of reducing costs, increasing transparency and ensuring fair treatment of debtors and maximum returns to creditors. We remain committed to this goal and to the process of seeking a satisfactory outcome for debtors, creditors and IPs through dialogue and debate. To that end, we will be meeting with the key parties early next week.

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Football clubs in the English Premiership and Championship are increasingly risking insolvency as the game’s economy begins to overheat, according to an in-depth survey of football club Finance Directors published today by PKF Accountants & business advisers.

Members of PKF’s Football Industry Group point out that increased Premiership television revenue has piled the pressure on the clubs in England’s top two leagues without adding to their bottom line profitability as clubs spend more on players’ wages in a bid to win or retain Premiership status.

Mindful of the dramatic decline at Leeds United, the report shows that banks are applying more pressure to top clubs seeking to increase their borrowing and increasingly demanding personal guarantees for debt from club directors.

Philip Long, head of corporate recovery at PKF and a football sector specialist, said: “There are clear warning signs that the football economy is overheating. The fact that 62% of Premier League clubs have increased their overdraft will be ringing alarm bells at the banks. Television money has increased but the banks will be worried that the money is effectively by-passing the clubs to be spent on buying and paying increasingly expensive players.

“The banks’ attitude suggests that, with player costs spiralling, not enough money is going towards the clubs’ balance sheets. The upcoming campaign is being financed through extra borrowings in an attempt to secure the rewards of a successful season but there is growing pressure on the clubs which don’t win. The excessive spending that brought Leeds to its knees is in danger of being repeated and could end with more clubs facing administration and ultimately insolvency.

“Backers like Roman Abramovich have taken the need for profitability out of the financial equation for a few Premiership clubs. But while they can spend money on new players almost at will, other clubs without the same financial muscle are being driven to borrow and spend more - potentially more than they can afford. The pressure is worse for Championship clubs seeking promotion as the pressure to spend is as great but the available resources are so much less.”

Premiership goldmine
In the English Premiership, 69% of clubs expect to make a pre-tax profit in their next accounting period. However, 62% of clubs have increased the level of their overdraft in the last 12 months and 31% of FDs said they were under more pressure from their banks.

69% of Premiership clubs will be spending more on first team wages this year with the remainder maintaining the same level. 54% of clubs are increasing their transfer budget and 23% maintaining the same level.

PKF partner Stuart Barnsdall said: “The increasing importance of competing for lucrative places in Europe and the financial implications of poor performance is fuelling demand for key players. The combination of increased funding from wealthy owners, higher value sponsorship and media rights deals and the ease with which Premier League clubs can access finance is driving up player costs. But there is little indication that clubs are becoming more profitable as a result”.

Championship roulette
The Championship has become the football pressure cooker with the research showing 78% of clubs – the highest of any league - not expecting to make a pre-tax profit and 77% of FDs coming under pressure to allow greater spending than the club can afford. No Championship respondents had increased their overdraft facility suggesting the leagues’ bankers are not keen to increase their exposure.

When it comes to player costs, the Championship appears polarised. A third anticipated increasing the size of the first team squad and 44% said they would spend more on wages. However 56% were looking to reduce its size and the cost. Only 22% will be increasing the transfer budget for the coming season.

Stuart Barnsdall commented: “The top half of the Championship is increasing spending, undoubtedly incentivised by the financial rewards of winning promotion. However the results suggest that more than half of Championship clubs either believe their squad does not have the capacity to win promotion or, more likely, are not prepared for the financial consequences of mounting a serious but ultimately unsuccessful challenge.

“Ultimately this is the league where the biggest risks may be taken. The gamble is how much you can afford to spend to win promotion and some gamblers may spend more than they can afford. If they succeed, the gamble will be worthwhile but the price of failure could be very high.”

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Nearly one in four young people would consider declaring themselves insolvent in order to get rid of the high debts they have run up, a report showed.

Around 22% of people aged between 18 and 34, the equivalent of three million people, said they would consider going bankrupt or taking out an Individual Voluntary Arrangement (IVA) if their financial situation became serious enough.

Market analyst Mintel said bankruptcy had lost its stigma for young people, with twice as many under-34s considering insolvency to be an acceptable solution to their problems as those in their parents' and grandparents' generations.

The group found that many young people had adopted an "easy-debt lifestyle" with those aged between 18 and 34 the most likely of any age group to have unsecured debt, with 60% owing money on credit cards, overdrafts and loans.

They have also racked up higher levels of debt than other age groups, owing an average of £3,200 each, 40% more than the average adult owes and four times the level of debt that those aged over 55 have run up.

Worryingly, one in four people aged between 18 and 24 blamed their debt on frivolous spending, admitting they had borrowed money to buy things they did not really need.

But while young people view bankruptcy as being an acceptable solution to debt, they admitted feeling stressed about the amount they owe. Many people aged under 34 face a dual struggle of paying off student debt and trying to get on to the property ladder - and 23% admitted they were worried about debt, compared with only 17% across all age groups.

Todd Davis, senior finance analyst at Mintel, said: "Student loans and the endless stream of credit card offers, overdraft extensions and hire purchase mean that there is no longer the stigma of going into debt that there once was.

"But the fact that it is now more accepted has done little to alleviate the stress of accumulating high amounts of debt. Bankruptcy is now widely accepted among young adults mainly because it is the natural follow on from rising debt but also because the Government has made the conditions of bankruptcy less painful."

He said many people saw the restriction put on them after being declared bankrupt as being the lesser of two evils.

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