Debt Management Blog

Debt problems on the rise

A report published in The Guardian states that nearly a third of people seeking help with their debts from a leading advice charity have been told there is no solution to their financial problems.

The charity in question, The Consumer Credit Counselling Service, provides free help and advice to those struggling with debt. According to the charity, 30,446 (32%) of the 96,334 clients counselled in the first half of this year had no “appropriate” solution to their debts. The only recommendation it had for the people was that they should earn more, which it acknowledged would be impossible for them.

The charity said that the main reason was that their household expenditure exceeded their income by an average of £449 a month mainly because they have been made redundant, had their wages frozen, or were burdened with extra expenses such as having a baby.

Meanwhile, figures released by the Office for National Statistics showed that almost 4 million UK households (one in five) have no adult in work. The number of people aged 16 to 64 in workless households was 5.4 million, up 26,000 from a year earlier, representing 13.5% of all people in that age group. Lone parents with dependent children had the highest percentage of workless households at 39.7%, followed by one-person households at 36.8%.

Debt experts have expressed their concerns on the issue and said that households with unemployed people will start to default on debt repayments, which could see a sharp rise in personal insolvencies.

Research undertaken by the University of Wales last year showed that there were about 2m ‘iceberg bankruptcies’ in the UK which means that employed people who could not afford any fall in income without defaulting on debt repayments.

Una Farrell, a spokeswoman for the CCCS, said that even bankruptcy was not really a feasible option for those dealing with debt because they owned a home which they could lose if they declared themselves bankrupt. She said: “It is exceedingly tough out there, and we are expecting it to get worse over the next year with further redundancies, interest rates going up and VAT rising in January.”

Debt experts usually recommend an IVA (Individual Voluntary Arrangement) as a better alternative to bankruptcy provided those in debt had a regular income to pay off their debts. For others there are various debt management plans available so if you are in debt, you can seek free debt advice to understand the various debt solutions available.