Debt & Bankruptcy Issues in the UK

Credit Awareness Week, an event that ran in the UK from May 14-20 highlighted the fact that half of Britons admit they make serious errors in financial judgement and have debt problems due to poor control of their finances. According to Credit Expert, more than 80% of people overspend on a regular basis, while millions of others are in so much debt that they seriously consider some form of debt relief such as bankruptcy.
Some of the financial errors that people make that are main contributors to overspending are taking out consolidation loans with long repayment terms and "therapy spending." In addition, research revealed that 5 per cent of people have either taken out an individual voluntary agreement(IVA) or filed bankruptcy because of too much debt. Almost 10 per cent admitted to taking out a credit card in order to pay off another credit card while another 10 per cent say they have missed payments on credit cards, loans, or mortgages because of their debt problems.
Credit Today Magazine along with an expert group of partner organisations that included Experian, the British Bankers Association, and the Consumer Credit Counselling Service organised Credit Awareness Week with the intention of helping the people in the UK learn how to gain better control over the financial decisions they make and thus, eliminate their debt problems.

Jim Hodgkins, managing director of Credit Expert states that the number of people who are making basic financial errors in judgement and even looking for quick fix solutions to debt problems such as filing IVAs is worrisome. What their research proved is that people in the UK have a serious lack of understanding about the long-term effects of financial judgement errors and how problems with debt can affect their credit rating and thus impact their financial future.

In spite of recent announcements of record insolvency figures, Britain is become a comfortable nation, a report states.

Research conducted by Credit Expert says that six million people in Britain would be unconcerned about their unsecured debt unless it reached £15,000 while another 1.4 million would only worry when it reached £50,000. Even with recent threats of interest-rate increases before the end of the month, the quarterly "credit pulse" survey indicates that people feel comfortable with the amount of debt they have accumulated on their credit cards and in unsecured bank loans. The report also shows that 54 per cent of adults are comfortable with the amount of debt they are carrying while 41 per cent are very comfortable with it, both substantial increases over the 29 per cent that was reported in January.

According to Jim Hodgkins from CreditExpert, the credit comfy generation that currently exists in Britain is numb when it comes to the real effects of increasing debt. Many people in Britain find it difficult to recognize the signs of an unmanageable debt load. With the rise in interest rates, many will suddenly find that their debt is in danger of reaching uncontrollable levels.

The survey was conducted on 2,000 people and also revealed that 30 per cent of people would be unhappy with only £1,000 of debt. According to money charity Credit Action, the average adult in Britain has £4,500 in unsecured loans.

A spokesperson for the National Debtline says it is difficult to say what level of borrowing should cause concern for an individual. Unmanageable debt is difficult to define as it is relative to a person's ability to pay. In addition, even with the levels of consumer borrowing on the rise, many people simply view their debt level as an unavoidable part of life and do not find it as an issue about which they should become concerned.

Recent research recently released by Scottish Widows reveals that the cost of running a household in Britain requires more than one breadwinner to maintain an acceptable living standard in 44 per cent of homes. In addition, 50 per cent of families with children find it increasingly difficult to make ends meet without both partners working. The average household with two children is £100,600 in debt, including the mortgage, £19,100 more than a household without children.

Richard Jones from Scottish Widows stated that the increased need for two-income households might be the result of a rise in consumer credit. Relatively low interest rates combined with high job security have made borrowing an attractive option for many households in recent years.

The report also revealed that 27 per cent of adults have no money in savings with another 25 per cent have less than £3,000.