Not too long ago, people in this country had very different ideas about right and wrong. People had more time for each other and for looking at their own moral standards and comparing them to those of others. One of the many effects of this was a sense of pride in being able to get by in life without help from the government or anyone else.
This led to a lot of poverty in the working classes and among the unemployed, who didn't want to owe money to anyone. The so-called middle and upper classes also didn't want to look bad when it came to money. The worst part of this "loss of face" was declaring bankruptcy. It's hard to understand the shame that came with this now, but it was very real back then. People lived within their means, which was often very risky, and a failed business was a common way to lose all credit.
Even the word "credit" has changed its meaning in a small way. It used to be a way for businesspeople to get money for an expansion or a new venture. Outside of business, the word wasn't used much. Credit is now more often seen as a way for people to spend more than they earn and live beyond their means, which has led to a rise in the number of people filing for bankruptcy.
This situation, on the other hand, doesn't seem to be as embarrassing as it used to be. Instead, it's become, if not a source of pride, at least an easy way out of a mess that you made. In England and Wales, almost 70,000 people went bankrupt in 2005, and the trend seems to show that this number will go over 100,000 in 2006.
This has led to a huge rise in bad debts, which are now over GBP3000 per person on average in the UK, for a grand total of over GBP190 billion. High street banks say they are getting hit especially hard.
What's the deal? There are two main factors: the number of options and the ease of getting them. Credit is now very easy to get, and some financial institutions are even eager to give out loans that have little to do with the borrower's income. Debit and credit cards, mortgages, unsecured loans, and "schemes" like consolidation agreements all add to the variety.
A second problem is that many people don't want to see the problems they have and deal with them while they still can. They tend to close their eyes and hope that everything will work out, which it does in a way, by filing for bankruptcy. This can cause them to lose their home and most of their belongings, and in many cases, their family may break up.
One improvement for bankrupts is that the cost of housing has gone up. This means that they may have enough assets to pay off their debts without having to sell their home, even though they don't have any money.
Do schools start the trouble? Not because students are going bankrupt, but because they don't get a good education in money matters. This really would be useful education: learning about the costs of credit, how to use credit cards responsibly, how to say no to that one-time deal, how to use a bank account, etc. All of these things would be very useful to know in the 21st century, when everyone is crazy about credit.
People also need to know what it will cost them if they lose control of their finances. That administrators will make all of their financial decisions, and that if anything goes wrong, they could be charged with a crime. That they may still be limited in what they can do for up to 15 years after they get out. The fact that an administrator will take 15% of all the money a bankrupt person makes as payment for their services may be the most telling. This is happening when the bankrupt will need every penny more than ever.
Limits on Bankruptcy About 10% of bankrupts who are thought to have gotten into debt carelessly are likely to get orders, and they will be made very aware that their situation is "self-inflicted." A restriction order lasts for up to 15 years and stops someone from doing business under a different name or being a company director. It also makes it almost impossible to get credit.
If you think you might have money problems or are already having them, you can go to www.nationaldebtline.co.uk (or call 0808 808 4000 if you'd rather) where the National Debtline is ready to give you free, unbiased advice. Their goal is to help people who need it and to cut down on bankruptcies.
