Thousands go into debt every day (From The Argus)

Thousands go into debt every day

9:43am Thursday 17th January 2008 in

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It may be the new year but people are still facing the same financial worries as more of us fall deeper into debt. The effect that crippling debts can have on us was illustrated by the death of Robert Howard who threw himself to his death from a footbridge. His father said his son had kept his desperate financial situation to himself.

RUTH LUMLEY reports.

Trainee pilot Robert Howard was dealing with huge financial worries when he leapt from a bridge over the A27 at Shoreham.

The 29-year-old, of Bedford Row, Worthing, who was known to his friends as Herman, kept his mounting debts to himself.

In a year which is expected to be financially tough, more people in Sussex are expected to declare themselves bankrupt than ever.

In Sussex, 563 people voluntarily declared themselves bankrupt in 2007, an increase of 45 per cent. Of those, 470 were living in Brighton and Hove, showing a 70 per cent surge in people who are willing to go down the bankruptcy route.

Elsewhere in the county, 40 people declared themselves bankrupt in Eastbourne in 2007, and 53 in Hastings.

Marcus Greer, from insolvency service NancollasGreer, which is based in Chatsworth Road, Worthing, said with offers of credit coming through our letterboxes on a daily basis, coupled with rising property prices and low interest rates over the past decade, personal debt in Britain is increasing by £1 million every five minutes.

He said: "Today alone in Britain, 7,716 loan repayments will go unpaid, 2,750 county court judgements (CCJs) will be issued and 77 properties will be repossessed.

"The average person now sees over half their net income eaten up by debt repayments and according to uSwitch, 23 per cent of Brits class their current level of borrowing as no longer manageable'."

He said many people in debt take out personal loans to consolidate their debts to make them more manageable by spreading them over a longer repayment period. But research showed that 66 per cent of people will continue to incur further debt on the loan interest, which is added to the amount borrowed to cover the original debts.

He said: "It is a road to disaster.

Debts start to spiral out of control and unfortunately many people, not knowing which way to turn, will simply do nothing and bury their heads in the sand.

"Robbing Peter to pay Paul is common but eventually lines of credit dry up, normally at the same time because of the attempted juggling act.

"Health and relationships begin to suffer. Research by the financial watchdog, the Financial Services Association reveals that finances are a taboo subject and 74 per cent of couples said that money worries are the hardest thing to discuss with their partner.

"It is advisable for people to seek professional advice as soon as the financial difficulties occur, as this can sometimes mean that more options are available and cuts down the number of stern letters, phone calls and the doorstep visits that inevitably follow non-payment."

The average household debt in Britain is £8,956, excluding mortgages.

The average amount owed by every adult in Britain who has a mortgage is £29,500. This grew by £190 last month.

Mr Greer said: "In terms of whether things are going to get worse, you can see by the statistics that debt is still increasing rapidly.

"A lot of people have used equity in property to bail themselves out in recent years. With property prices flattening and predicted by most commentators to fall, coupled with banks tightening lending criteria, particularly in the sub-prime market for people with high liabilities or poor credit rating, pulling out equity is not going to be such an easy option." The four most common methods used to clear debts are consolidation loans, bankruptcy, debt management plans or with an individual voluntary arrangement (IVA).

Each has its pros and cons and all are likely to affect credit ratings in varying degrees.

While many opt to consolidate their loans and make one monthly payment, the flip side is the amount of debt increases when interest and fees are added to the amount borrowed to pay off the original debts.

Bankruptcy also has a stigma attached to it and is advertised in the local newspaper, although it is likely to be the least costly way out of debt.

A debt management plan is an informal repayment arrangement with creditors, based on affordability and is normally arranged by a debt management company. But the interest is not always frozen and debts can take years to pay off because of the lower monthly payments. An IVA is a formal repayment arrangement with creditors, set up and administered by an insolvency practitioner, based on affordability and assets owned. It can take the stress out of dealing with creditors and the interest is frozen but failure to comply with terms can lead to bankruptcy.

If you are affected by debt you can contact NancollasGreer on 01903 206555.

A27 death leap man was crippled by debt

Do you think money lenders should take more responsibility for the level of debt in Britain?