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What do people do with all their money?

Following a significant level of high profile failures over the last 10 years or so, Insolvency Practitioners seem to have acquired the unenviable reputation of being undertakers crossed with bankers these days.

Certainly, whenever I’m asked by someone ‘what I do for a living?’ the question ‘what do people do with all their money?’ invariably arises.

Some people seem to think that anyone who has racked up debt and then needs insolvency advice has frittered their money away on ‘fancy holidays and the latest TVs’, ‘nice cars on the never, never’ or a ‘lived a champagne lifestyle, on a lemonade budget’. In my experience, this is rarely true.

In Scotland last year over 10,000 people entered a formal personal insolvency process whether that be a Trust Deed or Sequestration. Whilst a small number of these individuals will have entered formal insolvency due to the failure of their sole trader business or partnership, the vast majority of personal insolvencies will be as a result of over-spending on credit cards and personal loans.

Usually the credit card debt has been racked up, not so the family can have a fancy holiday, but just to pay weekly food, heating and housing bills. Just overspending on a week to week basis to make ends meet can mean that debt can rack up really quickly.

Personal debt levels are rising

Personal insolvencies rose by 2.1% in the last quarter of 2017. This indicates that consumer debt levels are still rising and inflation is outstripping wage growth. This is all putting pressure on people’s purse strings and that’s even before you account for increases in fuel, gas, electricity and food prices as the UK heads towards Brexit.

I have seen numerous cases where it’s as simple as the withdrawal of overtime that has been relied upon previously to make ends meet, which has tipped people over into insolvency. If we factor in the easy money that was available in the mid 2000s and the access people had to interest only mortgage products, then it is perhaps understandable that some people have got into extreme financial difficulty and this is still being felt by them now.

Debt and mental health

The advent of payday loan shops, commonplace on every, otherwise depressed, high street suggests that people in every town and city across the UK are feeling the pinch. The pressure of payday loans, unauthorised overdrafts and peoples inability to repay them is putting additional pressures on mental wellbeing. It appears to be the most vulnerable in society that are struggling with dealing with this type of debt. A recent report ‘Life on Debt Row’ published by the Royal Society for Public Health has now recognised debt as a ‘public health issue’.

There are options available to deal with unmanageable debt. Both Sequestration and Trust Deeds are formal insolvency processes in Scotland which allow individuals to write off some of their debts.

These processes will alleviate the stress of creditor pressure from the constant phone calls and red demand letters that individuals with financial difficulties inevitably regularly receive from those they owe money to.

As both options are formal, legal processes entering either a Trust Deed or Sequestration is a serious step and should only be taken after seeking professional advice. Getting this advice as soon as possible will help you remain in control and receive the best assistance available, tailored to your own personal financial circumstances.

Remember, it’s fairly easy to avoid paying for formal insolvency advice, here at FD Debt Solutions, we are bound by the Code of Ethics of our Recognised Professional Body to provide clear, honest and impartial advice in relation to your unique circumstances.

Looking for free insolvency advice in Scotland?

We are happy to deal with any specific questions you might have and can be contacted in complete confidence at 0800 652 0002 or you can contact us via the website. We provide FREE and no obligatory insolvency advice to the residents of Scotland. Our offices are located in Glasgow, Edinburgh, Hamilton, Stirling and Dumbarton.