People in extreme debt - is this really as common as I’m told?

[Lesterzap]

Chatting to my friend today who works id debt management. She was saying how busy it’s been since covid and COL crisis.

I mentioned how someone I know had ended up owing 20k. According to my friend 20k of debt is now a drop in the ocean and that there’s been a real increase in people in higher incomes owing 70-100k!!! Totally shocked by this. Aside from my mortgage I’ve never owed more that 5k (car loan)

surely that level of can’t be common?

I think people expect a much higher standard of living even if they don’t earn that much.

wage stagnation is a big thing though & more obvious now with higher inflation. Plus frozen tax bands.

36k in 2010 is equivalent to 53k ish. Loads of jobs won't have increased by that much though.

🎉 🍾

I got in an absolute shit load of debt when I was young. Nearly two years salary worth of debt by the time I was 22 (why on earth is so much available so young?!)

It got unmanageable. I missed payments, got issued defaults, I was thinking of declaring bankruptcy but in the end went on to a DMP, paid what I could each month but was just drowning in it. When I had my first son I had an honest chat with my parents one evening about how bad it was, how maternity leave was crippling me and I had so long left on my plan, and my dad paid the lot off for me and I've never been more grateful to anything, ever.

Given the way it played out, I'm sometimes grateful that it happened because it has made me so cautious with money now. I don't buy things unless I can afford them. I use a credit card throughout the month and pay it off in full. I've learnt my lesson and will never get myself back in that position.

It does stagger me how many people are in so much debt so young. Apart from a few key things I don't really know what I spent the bulk of it on. I just don't know!

This is a very important point. Wages have basically flatlined since 2010.

If growth had continued at pre-2010 levels, a stage weekly wages would be £230 higher.

The whole country needs a payrise.

a stage = average

400 or 40k?

Why were you shocked?

If you have an additional bedroom in your rented property and you are in receipt of housing benefit/ UC housing element you would have the 'bedroom tax' deducted from your award. The council's still refer to this as bedroom tax?

Children at university?
A joint income of just £60,000 (very easy with two working parents) would mean that your dc is only entitled to the very minimum maintenance loan that rarely even covers student accommodation rent. 60k in the south east does not stretch far with mortgage and 2 x car payments. And then to have to contribute around 5k pa to support your dc through uni, and even worse - imagine you were daft enough to have 3 dc. That's 45k you have to source and yet will have nothing to show for it.
Far, far to easy to end up in debt.

In Ireland so we don’t have student loans the way you do, but to get through college I had a part time job and paid my rent using a loan with horrendously large interest rates (because who takes a chance on a student?). Anytime I moved a loan or credit card paid for my deposit. Then got a credit card which I put my first car and holiday on. Had I not gotten a decently paying job I’d have continued down this route, loan/credit card, pay what I can but which wouldn’t be much, dig myself deeper into the debt.

I had 6k of debt and it felt massive. Low income though so it's all relative. It's now down to 1k and I can't wait to be free of it.

A refreshing thread, normally money threads are about people who keep £500 in cash in the house 'for emergencies' are overpaying their mortgage and have £50k in savings.

The reality for a lot of us is very different.

I am overdrawn past the point of my wages covering it ..so basically permantly overdrawn by a few thousand..and I have nearly £1k on a credit card. No other debt bar the mortgage.

It's how people are surviving now. And having a small amount of fun in a depressing world.

I'm not going to be miserable paying it back it back. It is what it is.

My ex landed me in over £40k debt and then I had to pay him to shut joint accounts down. Because he had a bad credit score it all went in my name, I was young and stupid. I even had the debt to his car, the finance went in my name but he apparently owned the car 🤔 At the end of the day I walked away giving him everything, taking all the debt on, slept on my couch (that he’d pressured me into putting on a ridiculous finance plan) for 18 months before my back couldn’t take it. It took over 10 years of struggling, in the end I ended up credit blacklisted with debt collection coming after me when I was so close to paying it off. I wish I’d said fuck it in the beginning and dealt with the fall out of not paying it, but I dragged it out, saw the light at the end of the tunnel when it all caved in on me. I worked in finance and appraised people’s applications for financial hardship. It can happen to anyone.

Yes, it's very common, and easily done too. One purchase leads to another, a period of SSP or unemployment. It could happen to anyone. And speaking from experience, a very frightening place to be in. The relief when I cleared my debt is indescribable to be honest

I hate having so much debt! I’m hoping to reduce it by at least 1K by the year ends. Can’t imagine how stressed I’d be if it was anything more than what it already is

I’m in my 20s and have debt to the tune of 30k. That’s my car (essential for my work, had to be a people carrier as I’m a childminder), a large work expense for my business, some essential damp repair work on my previous home and money loaned from family during the first lockdown to pay my mortgage.

I didn’t think it was the norm per se, but I didn’t think it was hugely unusual either.

@slopsan

i disagree. You are not forced to take the money, you choose to , and if you do so knowing you can’t make repayments the that’s down to you, and no one else

My net worth is so negative, you could bury The Shard in it. Here's how it happened:

I ran up a lot of debt after my divorce, renovating a total wreck to live in. Everything went pear-shaped due to illness, misdiagnosis and redundancy. My unsecured debts at that time were about 80% of my income; it would have been manageable if I'd returned to work as expected.

My many insurance policies quickly found reasons to stop paying out. Every single one of my creditors refused to freeze interest. It's been mounting ever since: last I checked, the total was six times the original amount.

A nice lady at the advice service worked out that I'd already repaid more than I'd borrowed (due to monthly interest), which helped with my awful feelings about it, but even she couldn't get the interest frozen or any small-payment plans agreed.

I should have prioritised a bankruptcy application but it's still on my back burner. It's expensive, humiliating, and a surprising number of things are barred to bankrupts, even if discharged. I won't be leaving anything when I die, but still intend to get this done so my brother won't have to handle the paperwork.

One sad & fairly ordinary story for you, OP. The very worst experiences - apart from homelessness, which I went through twice - were the customer service guys (always the men) who gave me ranting lectures about "wasting money on fast cars and Manolo Blahniks" when I'd done nothing of the bloody sort! It went on floorboards, a kitchen and a bathroom!

I worked in debt management many years ago, it's definitely not a new thing. I saw people in copious amounts of debts in excess of 75k plus, this didn't even include the mortgage.

@Lesterzap 400k. It is mind-boggling. If you met him you'd think he was so successful and not worried in the least about money. Actually I don't think he really does worry about money.

What someone said upthread about feeling entitled really resonated with me. When dh and I were paying a fortune for childcare, working really hard but with little to show for it at the end of the week I remember saying to dh that we worked so hard and did so little surely we deserved a takeaway once or twice a week. He said but just because we deserve it doesn't mean we can afford it.

Getting into debt because of health needs or catastrophic events like divorce/job loss etc is one thing but I think a lot of people get into debt just by living a bit beyond their means for many years.

Unfortunately it is as common as anything else these days.

I had to apply for a DRO last year for about £24000 worth of debt. It has since been raised to £30000 (limit) as that many people were applying for them and being slightly over. Long story short with me I had took out a loan while in a well paid job (taking home £4000-£5000 a month) me and my partner had our first kid on the way, loan went towards home improvements, a family car etc.

Our kid was born 6 weeks early and as a result was in intensive care for just over 5 weeks, unfortunately my manager at the time wanted me back into work after 3 days, even though our kid was 30 miles away in another hospital. So I lost my job and then it was harder to find a similar paying job whilst having a baby at home etc.

I remember the Citizens Advice worker who went through my DRO, he said they were getting at least 40+ applications a week just in that office, when they sometimes only got about 4 a month. Covid with the loss of jobs etc hit a lot of people hard who had manageable debt before hand, or become in debt because of it.

As people have said, read through MSE forums etc and a few others, people are now routinely in debt of £50k plus, or more. One of my old work colleagues had to take out an IVA, one of my old project managers who was on £90k a year has had to file for bankrupcty recently.

We have this discussion a lot at work, but I think with recent cost rises,and no doubt again next year with shopping/rent/gas/electric/fuel etc, the average family who earn about 30-45K will start to struggle imo. Families below that will start to get to the breadline at current rates.

It is taught in schools. Same as a lot of things but often ignored like safe sex and drug taking, alcohol etc. Teaching it doesn't mean it is always applied and followed.

No idea how much I owe, I've been paying it off for 20 years so hopefully less than I used to.

About £10k I think.

“A group of single parents have brought a claim against the CMS, complaining that persistent inefficiencies in the system and delays in investigation and enforcement against non-resident parents are causing them significant and prolonged financial difficulties and pushing them into poverty. They want a root and branch systemic review of the CMS.
Permission for the judicial review case was initially refused, but on appeal a High Court Judge has now granted permission for the case to proceed.
Single parenting charity Gingerbread provided evidence to the court about the continuing flaws in the CMS system. Gingerbread’s research suggests 36% of children covered by Collect and Pay arrangements are not receiving any of the maintenance they are legally entitled to, meaning since 2012, when the CMS began, £512.6 million in unpaid maintenance has accumulated.
It’s said that if child maintenance was paid in full to all children in separated families living in poverty who currently do not receive financial support from their other parent, it would have the potential to lift 60% of them out of poverty.
As a result of the court’s decision to grant permission for judicial review, the court will now consider the lawfulness of how CMS is currently operating.”

I imagine a lot of single parents (over 90% women), and their children are in debt because of this broken, corrupt ‘service’

I am sure the debtors can quite quickly and easily recover debts from these vulnerable individuals however they have no fair or accessible recourse to recover the debt owed to them and their children.

”According to The Times, the average cost of raising a child from birth to 18 in the UK is £202,660. This includes housing and childcare costs. That's around £11,250 a year, or £938 a month.” Feb 2023

This perhaps gives a bit more perspective to the situation we find ourselves in, in the UK

#fixtheCMS

Teach what in school though? That lent money is not free money and has to be paid back at some stage? Surely most people can grasp that. If people go on to borrow money, that's on them.