Money Debt & Credit In The Media
The Daily Mail, 'Middle-Class, nice car, pleasant home... and overwhelmed with debt'
By Sean Poulter
Consumer Affairs Correspondent
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The Daily Mail'Middle-Class, nice car, pleasant home... and overwhelmed with debt' |
It seems like one of the most prosperous areas in the country, full of new estates occupied by young professionals with well-paid jobs and company cars.
In fact, the M4 corridor to the west of London is a hot bed of secret debt.
Weighed down by the cost of homes and material possessions, apparently-successful middle-class families are increasingly turning to Individual Voluntary Arrangements to deal with their money problems.
IVAs are a step short of bankruptcy and do not involve the same public humiliation of court appearances and announcements in local newspapers.
According to the credit experts Experian, the highest proportion of households with IVAs is in Wiltshire, Berkshire and Buckinghamshire, which all run along the M4 corridor or Thames Valley.
The area has seen more a decade of booming house prices, the construction of vast housing estates and an influx of hitech firms and office complexes.
The debt problem, it is claimed, is almost as bad in Hampshire and Lincolnshire, which have seen similar developments. In terms of specific towns, Experian picks out Newbury, original home of the Vodafone Empire, Aldershot and Andover, which are both in Hampshire, Hatfield, in Hertfordshire, and Grantham, Lincolnshire.
According to Experian the rise in IVAs is being felt particularly among a group it has labelled 'happy families'.
These, it says, are 'younger, well-educated people with good career prospects and young children. They tend to live in modern homes on newly-built estates with Internet and cable or Sky TV.'
Leisure activities include squash, badminton, golf and even sailing and mountain climbing. However, it appears that the price of 'keeping up with the Joneses' has never carried a bigger price tag. Experian's Bruno Rost said: 'The evidence suggests that many people are borrowing way beyond their means. They do not have the income to fund this kind of lifestyle.
'Perhaps they are being over-ambitious; perhaps it is the difficulty of being weighed down by big mortgages and rising household bills.'
The total number of IVAs has jumped from 5,000 in 2002 to an estimated 40,000 this year.
An IVA involves convincing 75 percent of creditors to accept a partial payment of the outstanding debt - normally 45-50 per cent - or risk getting much less if the person goes bankrupt. The company arranging the IVA takes a fee.
The repayments under an IVA will normally run for five years, after which the person can once again apply for fresh credit. An IVA carries less weight in terms of putting a black mark on someone's credit history.
Bankruptcies are also rising sharply. Experian says its research suggests that individuals with low income and little assets are more likely to opt for bankruptcy than an IVA. The bankruptcy hot spots are dominated by the South West Counties of Devon, Cornwall and Somerset. These are followed by Essex and Humberside.
Specific towns include Skegness, Torquay, Bridgwater, Colchester and South Shields.
The majority of bankrupts have low incomes, tend to live on large council estates and rely on public transport. They will be using credit cards to pay basic living expenses.
UK banks were forced to write off £3.3billion in bad debts in the first half of the financial year.
TEACHER WHO GOT INTO DIFFICULTY
TEACHER Quentin Gunderson, 35, and his wife Sarah, 33, fell behind with their debt repayments and decided their best option was an IVA.
The couple, who have three young children, could have filed for bankruptcy but wanted to pay back the money they had borrowed.
'It's a win-win situation because the credit company gets more than if we went for bankruptcy and we don't suffer such touch financial penalties,' said Mr Gunderson, above, who teaches religious education in a secondary school.
The couple first got into difficulty when his wife, a care home nurse, was briefly out of work and he was in a lower-paid job as a youth worker.
'We weren't spending money on wild things, we were just trying to juggle the day-to-day cost of living,' added Mr Gunderson, from Reading, Berkshire. 'When my wife was out of work the repayments really started to bite and we soon fell behind. The IVA was a lifeline. It has cut our monthly repayments form around £900 to £300.'
