Worst debt ’caused by ignoring problem’

The people most likely to need a debt management plan or an individual voluntary arrangement (IVA) may be those who have tried to ignore their worsening situation instead of tackling it.

Such a situation is very common, according to spokesman for debt charity Christians Against Poverty (CAP) Alan Watt, who works for the organisation's Pontyclun office in south Wales.

He told the Cynon Valley Leader: "Of all the people we have seen, there is a common thread – the people who have ignored the problems the longest face the most extreme difficulties."

Research by CAP has found that common initial causes include difficulty with budgeting, unemployment and relationship breakdowns.

And in Wales the average debt of someone contacting the charity is £16,000.

Those considering an individual voluntary arrangement may note that it is a debt on such a scale (£15,000 or more) that can be tackled by one.

It works as a form of insolvency that falls short of bankruptcy, in which creditors agree to take a smaller amount, thus reducing monthly payments.

These lower amounts are then paid over a period of no more than five years, after which anything left owing is written off.

It may be particularly useful for those in danger of repossession, not least because reducing repayments on other debts may free up extra money to pay the home loan provider.

However, to be legally binding on creditors, it requires at least three-quarters of them to agree to the new payments.

One downside of an IVA is that it will restrict future access to credit, although some people may decide after struggling with serious debt that they can happily do without taking on more.

Figures published by CAP earlier this month revealed the second weekend in February is the one the greatest number of people seek help for debt, while the type of person most likely to ask for such assistance is a single mother in her early 40s with two children.

Posted by Paul Thacker