A record £1.4bn of bad personal debt has been written off in the UK in the last year.
At a time when many are out bargain hunting in the post-Christmas sales, spending yet more money on top of the pre-Christmas present-buying spree, research by accountants KPMG show the extent the financial trouble we’re facing.
Growing numbers of people are signing up for Individual Voluntary Arrangements (IVAs), while KPMG also found that in the last 12 months around 110,000 people became insolvent – topping the 100,000 mark for the first time (http://news.bbc.co.uk/1/hi/business/6215615.stm).
Not surprisingly, the study by KPMG (http://www.kpmg.co.uk/) has prompted campaign groups to reissue warnings about the “dangerous” levels of debt many in the UK are now amassing.
Debt levels are spiralling out of control for a significant section of the population and this study confirms just how bad the situation is becoming.
Someone entering into an IVA in the last year on average owed £52,000 and was proposing to repay 39% of the outstanding debt. It also estimated that about 3,000 people went into an IVA this year with debts of more than £100,000, while some consumers as young as 21 were running up debts of more than three times their annual incomes.
But just as financial firms have been heavily criticised for making it comparatively easy for people to gain access to more credit, there is also concern that IVAs are being touted as an easy way out for those unable to cope. Rather than making people responsible for their own actions and more importantly teaching them a tough but important lesson, some believe IVAs are seen as a soft option and a way of writing off the debts they have built up.
There is advice for those who are struggling – for example, the Consumer Credit Counselling Service (http://www.cccs.co.uk) offers a free and confidential service.
However, as there seems little chance of our consumerism being checked and while credit companies continue to approve higher and higher limits to those who simply cannot afford repayments, the figures for 2006 are likely to be topped again in another 12 months.