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For immediate release: Monday, 23rd January, 2006
BLEAK OUTLOOK FOR CONSUMERS IN DEBT – BUT HELP IS AT HAND!
- Internet largely instrumental in dramatic growth of IVAs -
The full extent of serious consumer debt is becoming increasingly reported and it seems as though everybody is getting on the bandwagon to help. August bodies like the BBC and the FSA have combined to compile a consumer “Debt Test”. Online sites, like Yahoo! and Motley Fool regularly carry debt help features. The personal finance sections of the national press are full of debt advice. BBC1 has even launched a daytime TV show, Beat The Bailiff, designed to help people buckling under financial pressure.
However, James Falla, Managing Director of leading debt solutions consultancy, Thomas Charles (www.thomascharles.com), points out that serious consumer debt has been evident since the mid 1990s. According to Falla, the single source of information which has had more impact than any other in helping consumers resolve their debt problems is the internet:
“Information about solutions for people in serious debt, like IVAs (Individual Voluntary Arrangement), has only really appeared in the national media in the past few months, despite having been available since 1986. However, for the past 5 years, the internet has proved an excellent source of information. Effectively it has opened up what, from the outside, looks like the Black Art of debt solutions. 95% of our clients at Thomas Charles come directly via our website. Ensuing discussion nearly always confirms that they found searching the web to be a “safe” source of information. People are often embarrassed and ashamed about the state of their finances. The Internet allows them to research the different options available and gain a degree of knowledge so they are well informed before having to take the often difficult leap of picking up a phone and asking for help.”
Falla believes that the internet is a significant driver behind growing consumer awareness of both IVAs and bankruptcy and the dramatic growth in their use. The figures speak for themselves. DTI statistics show that IVAs have nearly doubled in the last year, up 95%. The number of bankruptcies was up 31%. The IVA share of the personal insolvency sector has grown in the last year from 24% to 31%. The next quarter’s DTI stats will no doubt reflect a continuation of this trend, and IVAs are predicted to overtake personal bankruptcies in the next 2 years.
Help is certainly needed because bankruptcies are at record levels and over 200,000 people are believed to be on the brink of insolvency in 2006. Brighton County Court has reported a six week waiting list to hear applications for bankruptcy. Worse, over three million people now owe over £10,000 in unsecured debt: credit cards, personal loans and store cards; home repossessions were up 66% in the third quarter of 2005; and consumer borrowing is at a record £1.13 trillion, that’s nearly £19,000 for every man, woman and child in the UK.
Falla continues:
“There are many reasons why people get into serious debt. Although factors such as loss of a job or separation from a partner are often quoted, at Thomas Charles we are finding that it is the marginal problems that will often tip the balance between coping with debt and getting into real financial difficulties. Amongst our clients, the most common reasons behind debt problems include loss of overtime, leaving work to have a child and, increasingly, the legacy of debt taken while studying. Many of our clients with serious debt, i.e. over £15,000 of unsecured borrowing, have no prospect of repayment based on their current or expected income levels. For some, usually the young, with few assets and at an early, non-critical stage in their careers, bankruptcy is a real option. However, for most, bankruptcy has very real drawbacks. It will usually mean the loss of a home and even the car. Bankrupts are publicly declared in the local newspaper and are restricted from holding company directorships. It may also be difficult for a bankrupt to remain in other professions such as the police, armed forces and various financial services posts. At Thomas Charles we often find that the overriding reason for our clients not wanting to declare bankruptcy is a strong sense of duty to their creditors. As such, they would prefer to embark on an IVA allowing them to make the best return possible. Critically for our clients, the IVA allows them to repay far more than their creditors would expect to receive in a bankruptcy. The IVA also brings with it the advantage that further interest and charges are stopped; the client is protected from any future action to recover the debt by their creditors. In addition, the IVA will often result in a considerable reduction of the overall debt. Instead, a new amount is negotiated and an affordable monthly repayment programme is put in place, up to a maximum of 5 years. At the end of this time the slate is wiped clean and the client is free of all previous debt obligations. It is this last point that is most important to our clients - a light at the end of the tunnel.”
There is plenty of evidence that being in debt can cause serious psychological problems: becoming withdrawn and alienated from society, depression and even suicide. Falla comments:
“We get to know our clients problems in depth and effectively become their confidantes and trusted partners in seeking a solution that most believed wasn’t possible when they first came to us.”
Whilst an IVA may be an effective solution for some, it is obviously preferable not to get into such difficulties in the first place. Thomas Charles provides specific help to potential customers: a telephone help line, a free leaflet and an interactive test. Falla is even currently writing a book to help people in debt and he offers some simple tips:
- Do a detailed income and expenditure analysis to fully understand the scale of any problem
- Prioritise – ensure that you give priority to essential bills: mortgage/rent, council tax, utilities, food etc. After these are paid, work out how much you can afford to repay your debts each month. If you can afford to maintain more than the minimum payments, focus on repaying more to the most expensive (high-interest) debt first.
- Cut back to increase this amount if necessary - reduce spend on all non-essentials: clothing, going out, presents. Look at getting better financial deals: zero or lower-rate credit cards, remortgage if necessary, switch utilities, food shop for bargains, child-minder vouchers etc.
- Most importantly, talk to someone: friends or family in the first instance, or one of a number of specific organisations who help people in debt, like the Consumer Credit Counselling Service or the Citizen’s Advice Bureau. Alternatively, if you think your problem is really serious, speak to one of the many debt solutions consultancies, like Thomas Charles, 0870 141 7271
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About Thomas Charles & Co Ltd
Thomas Charles & Co Ltd was founded in August 2004 by James Falla and operates in the South East of England, with an office in Slough. It has a personal, consultative approach to debt management and has face to face meetings with all its clients.
Its debt management solutions include Informal Debt Repayment Programme, Individual Voluntary Arrangement and Bankruptcy. It works with third party Insolvency Practitioners in London and Cardiff.
For further information, please contact:
Stewart Ross (Ross Media Relations)
Tel: 07966 540787
stewart@thomascharles.com
James Falla (Director of Thomas Charles )
Tel: 01753 570442
james.falla@thomascharles.com |
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