Write offs rise as debt tops national output

The amount of money Britons owe is more than the country’s annual gross domestic product, new figures have revealed.

And this burden is so great banks are writing off over £20 million a day, a study by Credit Action has found.

The finance charity’s latest figures – based on data from the Bank of England – have revealed the extent of indebtedness, which for individuals in Britain now totals £1,452 billion.

It noted there was a further rise in this during October 2011 of £1.3 billion, of which £1 billion was secured.

The impact of this debt may lead to a large number of people needing individual voluntary arrangements (IVAs) and reducing what they owe as a result.

Evidence of this and other means being used to get some of people’s debts cancelled was emphasised by figures indicating £1.83 billion was written off in the third quarter of this year alone, of which £740 million had been run up on credit cards.

And in the last 12 months banks and building societies wrote off £9.9 billion of loans.

The average household in the UK now owes £8,556, but the figure is more than twice that for home which actually have an unsecured loan, at £17,825.

People struggling with debt and looking for an IVA need to owe £15,000 or more to qualify and it works by agreeing to pay a reduced amount to creditors, with the rest written off.

This becomes binding on all of them if 75 per cent of those owed money agree to the proposals.

Many Britons find themselves needing serious debt help measures because they have failed to act soon enough when their finances began to get out of control, managing director of the Debt Advice Foundation David Rodger said this week.

By Amy White