Bankrupt UK

In the last ten years, the number of women going bankrupt has risen by 500%, with the last year seeing a worrying 28% rise. The cost of childcare, unemployment and pay inequality are some factors, but insolvency experts cite some womens craving of a celebrity lifestyle to be a significant cause.

Women now make up 40% of all bankruptcies, according to figures from the Insolvency Service; almost 30,000 women were declared bankrupt in 2009, compared to just more than 6,000 in 2000. Managing money is particularly difficult with younger women two-thirds of female bankrupts are in the 25-44 age group. In 2008, 13,500 women in this group declared themselves bankrupt, while the next year the figure was 4,000 higher. Singers Mica Paris and Kerry Katona, both of whom have been declared bankrupt, are seen almost as role models by some young women. As an alternative to bankruptcy, many women are now opting for other paths to debt resolution, such as debt relief orders and individual voluntary agreements.

Graham Horne, deputy chief executive of the Insolvency Service, thinks that the figures prove that many women are trying to achieve an unsustainable lifestyle. Irresponsible spending can have a devastating effect, and it is vital that young people are aware of this, he says. It is absolutely the last resort to seek a debt relief order or to file for bankruptcy.

The argument that women have lower earning potential, earn less and own less than men has been put forward by womens rights groups. Single motherhood, career breaks and divorce, after which women are mostly left worse off than men, are all contributory factors cited by insolvency experts.

Women have now overtaken men as far as bankruptcy goes, according to debt charity, Consumer Credit Counselling Service (CCCS). While bankruptcies among men rose by 18% last year, 51% of those who were advised to choose bankruptcy over other options were women.

Nigel Millar, business recovery partner at Baker Tilly LLP accounting service, says that women in the 25-44 age group make up 58% of the female total. Women are now feeling the consequences of getting more credit because, these day, they have much more control over their finances than they used to, he says.

Around 14% of the pay gap between women and men, according to the Equal Opportunities Commission, is caused by women having to take breaks from work to care for their children or relatives. Anna Bird, of equality campaign group, the Fawcett Society, feels that men are more likely than women to have savings, so, when it comes to unemployment, women will need to be more dependent on benefits more quickly.

Debt relief orders (DROs) are an insolvency option for people with debts less than 15,000, 300 or less assets and income surplus of less than 50 per month. Last year, a huge 63% of DROs were awarded to female applicants, 12% of whom were aged under 25. There was also a significant rise in the number of women opting for independent voluntary agreements (IVAs), in which creditors and debtors agree on a repayment plan, increasing by 22%, while the rise for men was 20%.

The increasing number of women becoming insolvent is, the CCCS believes, due to rising unemployment. As public sector cuts hit, insolvency experts believe that the situation will worsen. Four out of ten women are employed in the public sector, twice as many as men. Anna Bird of the Fawcett Society says she is worried about these figures. When you consider the disproportionate effect that the emergency budget is likely to have, she says, it is disturbing to see the increase in women in financial trouble, and they will bear most the effects of any cuts in public spending.

Nine out of ten single parents are women, and this is thought to be the major contributing factor in female debt. The rise in households with single women is worrying debt experts, who advise women to live within their means, however uncomfortable this may be.

Contrary to popular belief, divorce generally leaves women poorer and men better off, with womens income reduced by a fifth, whereas men were 25% richer. There are other insolvency cases that have nothing to do with poverty and more to do with extravagance and financial mismanagement. Declaring oneself bankrupt has many negatives, such as the lack of credit opportunities and social stigma, but it has its upside, too. Louise Brittain, from accountants Deloitte, believes that the rise in bankruptcies among women is partly because of more women starting their own businesses.