The impact of personal debt on families is unmeasurable. How do we place a value on the resulting stress and fear debt problems create? Whether it’s debt collectors at the door or families arguing due to money worries, can we comprehensively measure the implications of troublesome debt? The Children’s Society is calling on the Government to provide legal protection to help families with problem debts.
The proposal would include a 12 month moratorium to help families in debt organise their finances without the pressure from creditors and with payments and interest frozen.
Interest Free Period – The Research
The Children’s Society research suggests that 620,000 families are spending more money on overdue bills than on food. 38% of families are borrowing money in order to pay for essential living costs like food.
Our own research at Debt Support Trust suggests that people typically fall into the debt trap because of unforeseen circumstances. For example, separation or divorce, loss of income or a change in circumstances are typical reasons for debt problems. A debt which was once manageable can quickly become a repayment issue.
The proposed changes recommended by The Children’s Society could help protect children from the societal effects debt can cause.
Managing Debt – The Effects
Debt problems often result in quick decisions. We found that people spend roughly seven years accruing debt, a year worrying about it before they make an immediate decision on how to deal with the debt.
If people had a period of protection from their creditors to help make an informed decision on their financial future, could that help guide more people towards the correct debt solution? Would fewer people enter bankruptcy because they realised they could potentially repay the debt?
In our experience, very few people want to enter a debt solution. In truth, it’s the complete opposite- they wish they never had to pick up the phone and make the telephone call. If 12 month moratorium periods were submitted by debt advice charities it would encourage people to seek advice and protection, so they could consider their options without the threat of creditor action.
In any event, the safety and security for children would be enhanced. Parents would be able to budget with a charity advisor and receive necessary advice on their finances. Barnardo’s estimates there are 3.7 million children living in poverty in the UK. Positive action must be taken to alleviate this social and financial crisis and it starts with changes within the Government.