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Revealed: How problem debt is forcing hundreds into insolvency

By Lisa O'Brien | Shrewsbury | News | Published:

Deteriorating finances forced hundreds of residents across Shropshire, Telford & Wrekin and Mid Wales into insolvency last year, new figures have revealed.

Rising numbers of insolvency cases across England and Wales is a cause for concern for debt advice experts, who have warned that the option 'should not be undertaken lightly'.

Insolvency Service figures show that 560 people in Shropshire were unable to pay their debts in 2018, and were forced to enter into repayment plans with creditors.

There were 492 people in the same situation in Telford and Wrekin and 221 in Powys.

The insolvency rate in Telford and Wrekin was higher than the England and Wales average, but it was lower in Shropshire and Powys.

Bankruptcies are included in the insolvency figures, but the count also covers less serious repayment agreements.

These are individual voluntary arrangements – agreements to pay off debts within a set period of time, and debt relief orders – which can write off debt for some low-income individuals who owe less than £20,000 and have no realistic way of paying it off.

Relief orders

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Debt relief orders are becoming increasingly common across England and Wales since they were introduced a decade ago.

And while there is a gender imbalance across all types of insolvency, these orders disproportionately affect women, according to the insolvency trade association R3.

Mark Sands, chair of the association's personal insolvency committee, said: "This links to the generally more precarious state of women's finances, as relief orders are used for smaller debt and asset levels.

"The gender split is also a sober reminder that women are more likely to be economically disadvantaged than men.

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"Women are also more prone to becoming insolvent following the breakdown of a relationship with men, as the Insolvency Service found several years ago."

Across England and Wales, almost 28,000 people were declared insolvent last year, and the insolvency rate has increased for the third year running.

The Money Advice Trust, which runs the helpline National Debtline, said the rise reflected 'the challenging times that many people face'.

Jane Tully, a director at the trust, said: "We know that there are a range of issues putting pressure on many already stretched budgets.

"But insolvency options should not be undertaken lightly, and it is crucial that people receive free, impartial debt advice before deciding the best course of action to take."

Rising numbers reach out to debt help services

There are many reasons why people fall into debt and the number seeking help is rising.

New figures show more than 1,000 people across Shropshire, Telford & Wrekin and Mid Wales were unable to pay their debts in 2018, and were forced to enter into repayment plans with creditors.

It is a growing concern across the UK and the problem is also rife across the county.

While some have no choice but to file for bankruptcy, there are many charities and organisations offering free support to help people with getting their debt under control.

Community Money Advice, which has its head office based in Shrewsbury, is a national charity committed to supporting churches and community groups which have a passion to help people overcome their money problems.

It provides all the resources, training and support needed to establish and maintain local, free, face-to-face debt advice services.

It has helped to set up about 150 centres nationally, including in the Shrewsbury, Telford and Bridgnorth areas.

Its debt advisers offer advice, specific to each person’s needs and give as much time and support as they can to help them become debt free.

The charity’s centres in Shropshire have helped 110 families to manage £1.62 million of debt since the beginning of this year – a small increase from 2018.

Heather Keates

Heather Keates, CEO of the charity, said: “Services are free and face-to-face and really can unpick any debt situation and look at the best options available.

“It could be helping someone to budget, making sure they are getting enough benefits which they are entitled to or helping them deal with bankruptcy.

“The whole point is to hand hold someone through the whole process and for as long as they need.

“Quite often people are in an anxious state. The first job is to start unpicking what is going on – is there a reason why they have got into debt.

“We also try to put some form of budgeting education alongside debt advice.”

She says there are a number of reasons why people can fall into debt.

Borrowing

“The types of problems coming through the doors are getting more complicated,” said Heather.

“It used to be much more straight forward. People tend to wait until things get really bad. Things like benefit sanctions and delays in benefit payments in the last three to four years has become a huge issue.

“People who have previously been managing, suddenly they are tipped over the edge.

“They are having to go to the expensive credit providers which gets them into a loop, they are borrowing to pay off their borrowing. It gets out of control.”

She says rising interest rates also contribute to problems for some people with mortgages.

The StepChange Debt Charity also provides free advice and a range of services across the UK.

The charity says problem debt is a widespread issue across the country, but Shropshire and the West Midlands is particularly affected by it, with approximately 11 per cent of its clients coming from the region – the joint third highest in the UK.

Will Berrington, spokesman for StepChange, said: “People experiencing problem debt may not initially realise the difficulties of their situation, or indeed that there is free help out there for them to access.

“There is no minimum threshold for seeking debt advice, and impartial debt advisors will be able to take you through a range of solutions and assistance to help get you on your feet.

“Debt solutions are wide ranging, and will depend upon individual situations. Some plans, such as debt management plans, may see you pay your debt paid back over a certain period of time.

“Others, such as an insolvency solution like a debt relief order, may see a certain amount of debt written off, with attached conditions.

“Most importantly, nobody needs to struggle with debt without support. A phone call to us or similar organisations is all it takes to have that expertise at your fingertips. For those who cannot call, support can be found at stepchange.org.”

Most people are in problem debt because of financial shocks like illness or unemployment, rather than simply because they’ve overspent.

StepChange’s latest research has found people who’ve experienced a shock like losing a job, splitting up with a partner or falling ill in the past two years are three times more likely to fall into problem debt than those who have not.

But the charity warns that people should still think carefully about whether their debt is a sign of something more serious and know that help is available if needed.

Jane Tully, director of external affairs at Money Advice Trust, the charity that runs National Debtline and Business Debtline, said the numbers of people contacting free debt advice services continues to remain high.

She said: “Increasingly our advisers are hearing from more people struggling to meet the costs for essential household bills such as council tax, rent and energy – nearly one in three callers to our National Debtline service is now in council tax debt.

“For anyone in financial difficulty, it is crucial that they seek free debt advice as soon as possible and before problems potentially escalate.

“At National Debltine we offer free, independent debt advice for people struggling with their finances over the phone and via webchat at nationaldebtline.org.”

Council tax debt

Shropshire and Telford & Wrekin Councils say they do not give individuals insolvency or money advice but can signpost people to services that can help, such as Citizens Advice.

Debt advice requires recognised qualifications, continuing professional development of the individuals, and the organisation must be accredited and audited as fit to provide this advice.

Phil Weir, Shropshire Council’s revenues and benefits service manager, says some people can struggle to pay their council tax but staff look to see whether people could be eligible for council tax support or other entitlements.

He added: “In collection of council tax we will always work with people in order to try and make appropriate and realistic payment arrangements to pay their council tax.

“In addition all bills and reminders that we send out signpost people who are struggling to pay to a number of independent agencies where they can get help.

“The message is, that if anyone is struggling to pay their council tax then they should contact our team on 0345 678 9002 and we will, of course, try to help.”

For further advice visit telford.gov.uk/info/20283/housing_benefit/303/independent_advice_and_support

Here are a few easy steps to clearing your debt:

  • DO A BUDGET: Write down all of your income and everything you’ll have to pay out, from your regular household bills to your weekly food shop. Think about any one-off expenses you’re likely to have too. Once your budget is complete, subtract your estimated outgoings from your income. This is your ‘disposable income’, and it’s what you’ll have available to clear your debt.
  • CAN YOU BRING IN ANY EXTRA CASH?: If your normal disposable income won’t cover your debts, you might want to look at ways you can increase your income in the short term. There are lots of ways to make a few extra pounds, such as by selling unwanted possessions, using cashback websites or taking on extra hours at work.
  • CAN YOU MAKE ANY SAVINGS?: There are many ways to save money, and anything you save can be put towards those debt repayments. It could be as simple as switching to a cheaper supermarket or taking shorter journeys on foot rather than by car or bus.
  • PRIORITISE: Once you’ve factored in any extra money you can bring in and savings you can make, if your disposable income is enough to start clearing your debts, then it’s easy – you’ll be able to start paying everything off. If not, though, then you’ll need to prioritise. You’ll need to make sure you cover the minimum payment on every debt you have, to avoid default charges and affecting your credit rating. After that, you should pay most towards the highest-cost borrowing – that’s the debt on which you’ll have to pay most interest and charges.

Lisa O'Brien

By Lisa O'Brien
Senior Reporter - @lisaobrien_Star

Senior reporter based at Shropshire Star's head office in Ketley. Covering the Telford area.

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