News from the Money Advice Service that nine million people in the UK are living with serious debt is just the latest statistic to capture the scale of the problem.
According to a survey by the government-backed service, only 17% of these people have asked for the free advice that is readily available to help families manage their debt burden.
No wonder, then, that increasing numbers have turned to payday lenders and loan sharks, or that there is a mental health toll on people caught in a debt trap.
Earlier this month, the Centre for Social Justice, the think tank set up by Iain Duncan-Smith, the work and pensions secretary, warned that household debt had reached an average of £54,141, up from £29,000 a decade ago. Its report, Maxed Out, found that personal debt, including mortgage lending, now stands at £1.4 trillion.
Consumer debt of £158 billion trebled since 1993, with credit card debt at £55.6 billion.
The 34,000 homes repossessed in 2012 from people with mortgage arrears was actually down 30% from the peak of the recession, though a 60% increase since 2006.
Spike in IVAs
Against that good news, latest figures from the Insolvency Service show that in the third quarter there was a 4% increase in personal insolvencies to 26,030, driven by a spike in individual voluntary arrangements (IVAs) to 13,394, the highest number in three years. These allow people to pay back what they can afford after reasonable living costs.
It must be noted that formal bankruptcies and debt relief orders – respectively 6,004 and 6,632 – are at record lows.
Look too at unemployment statistics for some good news, down to a jobless rate of 7.6% and with 177,000 more in work in the three months to September, in the labour force survey used by the Office for National Statistics. These figures allowed the Bank of England governor, Mark Carney, to say the economic recovery had taken hold.
Against this mixed background, it’s no wonder that some companies can find their file of unpaid accounts is growing. At SJ Collections, we have long experience in negotiating to get that money back. Sometimes it is a matter of compromise, as in the IVAs reported above, taking a percentage of what’s owed or accepting a low repayment over a period of time.
In an improving economy, a payment plan can help your company’s cash flow while also helping your customer to get back on their feet. And that’s a good thing all round.