It's easy for sheltered people to say that those struggling with debts have only themselves to blame. We say they're wrong, and show you where to go to get support and find your debt solution.
As you may have read elsewhere, Citizens' Advice has reported another huge increase in debt-related problems this year. Debt enquiries have gone up 20% to 1.7m. Also, over the past ten years, debt problems have doubled.
It's clear to me that the vast majority of these debts are caused by irresponsible lending. I have no sympathy with the many readers of The Motley Fool who argue that it's entirely the borrowers' fault. Nor do I have any faith in their view that millions of debtors have deliberately and recklessly racked up debts knowing that they can go bust and start all over again.
The majority of people who claim these things clearly have no understanding whatsoever of why most people get into debt trouble, and of the effects it has on the whole country.
Unlike these people, I'm not sheltered from the truth about debts, because I'm immersed in the details of the subject, reading regular reports and numerous personal accounts. Here's my take:
Some people claim that it's the individual's responsibility to stay solvent and out of deep debt, and that they deserve no support.
This 'survival of the fittest' policy is short-sighted and a false economy. If people can't manage their money properly they should be protected, not given up for dead. Firstly, we must remember that no government has introduced personal finance lessons, meaning that many people don't get to learn about money management, or learn the hard way.
Furthermore, and much more importantly, we must consider the contribution that defaulting debtors make to the economy and national productivity, versus the contribution they'd make if they weren't up to their eyeballs in debt. You'll find that many skilled artisans, competent lawyers, experienced dentists and hard-working labourers have no money skills, or have had bad luck, and have consequently built up a dangerous level of debt. As a result they become unhappy and stressed, and are unable to perform their roles properly. But we need these people and their skills, so this effect is detrimental to us all, and it's happening to millions right now.
Some people claim that too many debtors are just recklessly building up debts and spending exuberantly, knowing that they can go bust and start again.
This assumption that 'everyone's at it' is totally not the case. The huge, vast majority of people in serious debt get there unintentionally, and they are ashamed, sad or depressed, and extremely anxious about it. Furthermore, they genuinely want to deal with it, if they can. They need our support, not our derision.
Some people think that the cost of their loans have been driven up by too many people defaulting on debt.
Also incorrect. By lending willy-nilly, banks have been able to offer much better rates to the people with the better credit records. The losses they have made through bad debt have been more than compensated for by the extra interest paid by those debtors who haven't defaulted, but shouldn't have been granted loans anyway.
(A note for those of you who understand the `credit crunch', and therefore might disagree with the above: the crunch has been caused entirely by the banks mis-management of second-hand debt. The blame is entirely at their greedy doors, not that of borrowers. How a bank with a half-decent board can fail to make decent profits is beyond me.)
Some people say that it's too easy to go bust these days.
I'm sure I'll be overwhelmed with angry emails for saying this, but I'm afraid this view is naive.
The government is the biggest culprit here, because it has, in my opinion, deliberately created a ten-year borrowing binge to make people spend more. This was done in order to keep the economy growing at the rate they considered desirable.
As a result of making it easier to borrow more money, and of doing nothing to restrain the banks nor to educate people better, more people have got into dangerous financial positions. Therefore it became necessary to give them an easier, ultimate way out for their emotional and mental well-being. That's why relaxing the bankruptcy laws was a good thing to do.
So, if you're struggling with debt, don't feel bad. There are millions like you who have fallen on hard times, for one reason or another, and you all deserve support.
I doubt this article will do anything to change many people's preconceptions and biases. Sadly, you won't get any support from them. However, you can't imagine the support that is available to you from a variety of sources:
- For a practical guide read: How To Get Out Of Debt.
- I strongly urge you to check out my number one resource for dealing with debt, which is our community that provides you with emotional support and practical guidance: the Dealing with Debt board.
- And check out these other useful debt resources.
Face your debts now and you'll feel better sooner. There is a solution for everybody.