Latest figures produced by the Chiltern Debt Management group show that the average size of debt from those currently in a debt management scheme currently stands at £26,500, which is owed to an average of eight creditors. However, the average income of those being helped stood at £23,416 with only 18% of that sum left over to pay debt when essential living costs were deducted.
Debt management schemes are informal arrangements, in which a third party acts as an intermediary between an individual and their creditors, and the amount taken out has been on the increase over the last few years. The debt management company helps an over-stretched borrower agree what they can realistically afford to repay each month to their creditors, and then collects a single payment from the individual before distributing it to the creditors. To help the process creditors agree to suspend applying interest and other charges.
However, the latest figures show that most people that are being helped can only afford to pay 26% of their minimum monthly payments, and they owe almost two-thirds of their monthly income in repayments. Even if restructured to monthly affordable levels it would take the average debtor over 12 years to rid themselves of their debt, highlighting the problem of increasing debt levels in the UK.
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The money participants picked up far fewer pencils than did the controls, . “Debt is good; the more you owe, the more you own,” I once heard a confident
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Amongst this group, the proportion with more than $10000 in debt rose from 32% the amount of their debt, but rather the salary they could earn once they
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The report also found that men are less likely than women to take out a debt management plan, which is suitable for most people with total debts of less than £15,000. Indeed, almost 58% of people taking out debt management plans are female, backing up recent reports suggesting that women are increasingly taking control of the majority of UK household finances.
There are other debt solutions, rather than opting for debt management, but many are finding it increasingly difficult to take out an Individual Voluntary Agreement (IVA) – which is suitable for those with debts in excess of £20,000 - as banks are requesting that insolvency practitioners take less in fees, leaving them with more recovered debt. Other than IVAs, the ultimate option is bankruptcy, but homeowners and those without a house but with a good credit rating could opt for a debt consolidation loan where all their debts owed are totted up and a loan taken out to pay them off. This leaves the borrower with just one loan and one convenient and affordable monthly payment. But, for many people where that is not a feasible option they should in the first instance get independent advice from a body such as citizen’s advice.
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Debt Management Participants Owe More Than They Earn