1.5m families now with extreme levels of debt

This week, it has been reported that more than 1.5m families in the UK are now in extreme debt. The report by TUC and Unison, entitled Britain in the Red, states the reason for this is due to the “collapse in the value of pay” as wages have fallen over 10% from 2007 to 2015.

By the end of 2015, the total unsecured debt (excluding mortgages) for UK households hit £353 billion, with a rise of £48 billion from 2012. The report highlights two areas of debt which are becoming very difficult for households to deal with.

The first is ‘problem debt’ where households are paying out a quarter of their income on unsecured debt repayments, this is an issue for 3.2m households currently. The second is ‘extreme problem debt’ where 40% of household income is being used for debt repayments, a problem for 1.6 million UK households.

Frances O’Grady, General Secretary of TUC, one of the report’s authors, commented on the report saying; “Families can’t continue relying on credit cards and loans to get by, but with the average wage still worth £40 less than before the 2008 crash, lots of families have little choice.”

While head of policy at StepChange Debt Charity, Peter Tutton, said; “Every week we see thousands of households struggling to keep up with their essential bills and credit repayments. Sluggish wage growth and the rise in insecure jobs have left households even more financially vulnerable.”

It has been suggested that the Government must include higher wages in their economic plan as well as doing more to help families struggling with debt problems to get access to debt restructuring and insolvency support.

Support of the kind we offer here at Personal Debt Solutions, our advisors will provide you with free advice to help you consolidate your debt into a plan that will suit your financial needs. Some of the options on offer to you that we can advise you on include:

• IVA – this is a formal procedure that alleviates pressure from those you owe money to by setting out a clear and affordable repayment plan for you. 75% of your unsecured creditors by value (those you owe money to) will have to agree on this but once agreed, it will halt all creditor action and allow you to pay off your debts in affordable monthly repayments. To find out more about IVA’s, visit our IVA page.
• Bankruptcy – simply put being bankrupt means you are unable to pay your debts. When you go bankrupt your assets such as your house and car are put at risk but after the 12 month bankruptcy period, all remaining unsecured debts are written off. You can find out more about this on our Bankruptcy page.
• Debt Management Plan (DMP) – this is an informal agreement between you and your creditor which acts as confirmation that you will pay off all of your debts. It can help you manage your debts by reducing the monthly repayments and offering a light at the end of the tunnel to becoming debt free. For more information, visit our DMP page.
• Debt Relief Order (DRO) – this would be suitable for you if you have a relatively low level of debt and few assets to help write off those debts and avoid bankruptcy. If you think this could benefit you, then visit our DRO page for more information.

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