Household Debts Spiralling Despite Economic Upturn

The UK economy may appear to be in recovery but according to statistics released by National Debtline, many British households are still struggling with high levels of hardship and debt. National Debtline, which is operated by the Money Advice Trust charity, says it helped more than 150,000 people with their household debts in 2013, a 140% increase on 2007, before the financial crisis began.

Reflecting our recent article on council tax arrears, the charity has also noted a big change in the make-up of consumer debt, with more people now reporting problems with essential household bills than with ‘traditional’ debts such as loans, overdrafts and credit cards. Key statistics from their report include the following increases in enquiries since 2007:

  • 305% for water rate arrears
  • 230% for phone bills
  • 171% for energy costs
  • 97% for catalogue arrears
  • 95% for council tax payment problems.

Commenting on their report, the Money Advice Trust’s Chief Executive, Joanna Elson, said that: ‘The gradual erosion of some families’ surplus income in the face of rising prices has led to a new generation of debt problems – one to which more people are vulnerable, one which is harder to resolve, and one which has no definitive solution.’

The Trust has pinned the current situation on soaring inflation levels and static or falling incomes, which have led to countless families finding themselves no longer able to cover basic living costs. Rising interest rates – an inevitable result of the recovering economy – are likely to compound the problem, pushing even more households into debt.

Andy Gorton, Managing Director of debt advisory service Bankruptcy Clinic, comments: ‘The fact that National Debtline are now speaking to a higher proportion of people – 40% of callers compared to 20% in 2007 – with severe debt problems, but who owe less than £5,000, is revealing.

‘It’s clear that families who could previously get by are being tipped over the financial brink by relatively small increases in their living costs. And as Ms Elson says, there’s simply no room in many people’s budgets to accommodate the inflation-linked hikes that we’re seeing in food, energy and fuel bills.’

The Money Advice Trust is hoping that government changes such as an increase in the minimum wage, along with consumer-focused help from the Financial Conduct Authority, will help improve the situation, but warns that more needs to be done to help lower income families stay afloat. In the meantime, it could be too little, too late for those households whose finances have already buckled under the pressure.

You’re certainly not alone if you’re finding you can no longer make ends meet,’ says Andy Gorton. ‘The important thing is not to bury your head in the sand. The problem won’t go away on its own, so it’s vital that you take action straightaway before things get out of control. The sooner you speak to a professional debt advisor about your money problems, the sooner you can start overcoming them.

Tackle your debts with Bankruptcy Clinic

Bankruptcy Clinic works in partnership with one of the UK’s leading debt management and advice companies, MoneySolve Ltd. When you contact us, we’ll put you in touch with one of their friendly and qualified debt advisors. They’ll take the time to listen to your story and to fully understand your financial circumstances and debt problems.

Next, your advisor will talk you though the debt solutions that are open to you. Your options might include a flexible informal arrangement to repay your creditors, known as a Debt Management Plan, or a legally-binding insolvency solution such as an Individual Voluntary Arrangement, Debt Relief Order – or even bankruptcy.

You’ll find more information about each of these solutions on our website, so why not have a read through to get an idea of which debt management option(s) might work for you? Then you can give us a call, drop us an email or fill in our quick online form when you’re ready.

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Andy Gorton is the author and editor of the Bankruptcy Clinic

Andy Gorton – who has written posts on Bankruptcy Clinic Blog.

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