Personal Debtors in England & Wales owe more than 116% of their annual income – before any mortgage is taken into account.
Personal Debtors in England & Wales owe more than 116% of their annual income – before any mortgage is taken into account. The survey, compiled from data submitted by more than 1,000 applicants to www.cleardebt.co.uk shows that, amongst people concerned about their debt, 78% owe more than they earn in a year on credit cards and loans. More than a quarter owe more than two years’ income.
The ClearDebt survey shows that men owe more than women (men owe 145% of salary, 11% higher than women).
Debtors in NW England owed the highest proportion of their income (164%). West Midland’s debtors had the lowest debt/income ratio, at 79%.
More than 70% of the debtors approaching ClearDebt were under 35, yet, despite the fact that more than a third of these individuals owe more than12 month’s earnings younger people seem many times less likely to take action to deal with their debt.
It is the over 45s who are much more likely to follow through seriously once our site has shown them a route out of debt”. Comments ClearDebt’s founder, David Mond of Manchester chartered accountants’ Hodgsons:
“It’s almost as if younger debtors think that in time, maybe with a new job or a pay rise, the problem will go away. At the levels of debt we are seeing this is unlikely – and I’d venture to suggest that, even if bankruptcy now looks easy. Subsequent difficulties in obtaining mortgages and credit are likely to have far reaching effects on those younger debtors who exhibit ostrich-like behaviour”.
More data and details of the report can be obtained from ClearDebt spokesman, Andrew Smith (01234 825825; 07971 272 483; firstname.lastname@example.org).
Note for Editors:
WHAT IS CLEARDEBT?
ClearDebt is the newest entrant to the Individual Voluntary Arrangement
ClearDebt is the product of a vision to provide the most transparent and ethical service to debtors, at the lowest cost – giving many more people the opportunity to arrange an IVA than has been possible before. All customer-facing staff have been specifically trained in IVA provisions and all have insolvency practice experience: we are not a call centre, nor do we employ call centre type operatives.
ClearDebt’s principles include providing best advice wherever possible to all debtors: Where the facts indicate an IVA is the right solution we will provide advice and support – but never pressure – to the debtor. Where the facts indicate other solutions we’ll point the debtor in the right direction and where we think debt-management is the answer we will strongly suggest they will do better DIYing this than using a debt management consultancy and we’ll soon provide tools and links to help.
Our two-minute ClearDebt Analyser provides any debtor with clear advice on the options they have to become debt-free. If a debtor chooses to go further with ClearDebt we ask them to complete a second stage questionnaire, which enables us to make informed decisions, respond swiftly and cut out cost. We offer email and telephone help at this stage. We originally thought people would take around 45 minutes to complete this, over several sessions but our users are finding this a much faster process than that.
ClearDebt w is backed by David Mond of Manchester chartered accountants and insolvency practitioners, Hodgsons. David was the administrator that rescued High Street DIY chain FADS and the council member of the insolvency practitioners’ representative body (R3), who pushed the profession (particularly its legal representatives) to adopt standard terms for IVAs, making them a more useable tool for the relief of personal debt.
ClearDebt’s costs are a great deal lower than our competitors (ClearDebt believes we charge less than 50% of our closest competitors‚ fees). Currently we believe that our fixed nominee fee of £1250 for debts of over ¬£15,000 and £750 for lower levels of debt are the lowest in the market place. This gives many more people the opportunity to arrange an IVA than ever before, simply because the fees are low enough to allow creditors a reasonable return at low levels of debt. Our fees will not be charged to the debtor separately but will be part of the fixed monthly payment agreed with creditors.
We know that some providers charging relatively low nominee‚ fees make more on the annual supervisor‚ fee. We will charge £500 pa on any level of debt.
Our costs don‚ include VAT and disbursements. The principal disbursement is a bond held by the Insolvency Service and which helps pay their costs. This, applicable to all insolvency cases and not just IVAs, is a significant expense and, if it were possible to remove this requirement, even more people could be helped.
Finally, the ClearDebt process makes it clear to the debtor that an IVA is a process for which they, themselves, must take responsibility but we intend to provide help, advice and tools at every stage of the process to support the debtor and minimise failed arrangements.
ISSUES – DRAWBACKS OF DEBT-MANAGEMENT
ClearDebt believes most informal arrangements aren’t worth the paper they are not written on: You would be unlikely to find an informal arrangement that forgives much debt, and freezes interest – and few creditors will throw away their rights to pursue all they are owed at a later date. IVAs achieve all these objectives. We believe you will probably be able to find many readers who have tried informal arrangements and have benefited little by them.
ISSUES – PROBLEMS WITH IVAs
Currently a professional code of practice obliges insolvency practitioners (IPs) to see each debtor to ensure the debtor understands her/his responsibilities. Many IP’s would like to see this requirement abandoned and, indeed, this may be suggested in a consultation, which is likely to be published by the DTI’s Insolvency Service shortly.
ClearDebt believes this requirement should remain in place. Indeed we intend to strengthen it by, wherever possible, getting an independent insolvency lawyer or licensed insolvency practitioner (or their professionally-qualified representative) to meet the debtor, thus avoiding the perceived conflict-of-interest that might exist if the IP recommending the IVA took the meeting. We believe this meeting is also in the interest of creditors, as it will underline the debtor’s responsibilities: It should not be abandoned.
Many creditors, or their representatives, are concerned that some IVAs are mis-sold‚ where the debtor’s ability to fulfil the arrangement is marginal. We think the potential demand for IVAs is huge and, if use of the procedure took off, this problem would become acute. ClearDebt’s system will encourage debtors to be as realistic as possible and, unlike some IVA providers, we will take our remuneration as we receive payments from the debtor rather than upfront, ensuring we are better rewarded for arrangements that work.