Here at TFT we don't like to scaremonger. We don't pass on fuckwitted emails about getting your drink spiked and waking up with your kidneys missing. We don't go around telling women that if they haven't had kids by the age of 26, they may as well consider themselves sterile. And we don't parrot every shock-
horror story that the media carelessly spews out, e.g. 'Can tap water give you AIDS?'
But this week a story caught our eye that was genuinely disturbing. Financial analysts KPMG have predicted that the number of personal insolvencies (i.e., bankruptcies) this year will be three times as many as in 2003, the reason being higher levels of personal debt. While it's hardly news that levels of personal debt are scarily high, the scale of the insolvency problem is quite staggering. A record 26,000 people became bankrupt in England and Wales during the second quarter of 2006. This is 66 per cent more than in the same period last year. That's during a *quarter*, not a year. KPMG predicts that the total number of personal insolvencies this year will exceed 100,000.
When you consider that by the time most people are declared bankrupt their finances are utterly fucked, that's an enormous amount of misery and grief. And while some people no doubt abuse the option of bankruptcy, for most bankruptcy really is the last resort - it involves a serious legal process and handing over your finances to other people. It screws your credit rating and gives control of your finances to a trustee. And unless you've got the morals of a chequebook fraudster, you'll probably have had a lot of sleepless nights, guilt and anxiety before you actually become legally insolvent.
That insolvency should have risen so dramatically is no surprise, given the levels of debt in the UK. According to the charity Credit Action in 2003, the average person between 18 and 30 owes £7,718 each through credit cards, overdrafts and loans. That's everyday debt - not a mortgage on the world's tiniest house. The result of this is that bankruptcy, once the preserve of ropey fly-by-night small businesses featured on 'That's Life', is entering the mainstream: the proportion of bankruptcies among the 18 to 29 age group more than doubled in the four years preceding 2003.
The big question, of course, is why people get so heavily into debt in the first place. (For the purposes of this article, let's be clear that we mean *serious* debt, not being £115 overdrawn and not being able to afford *those* boots.) Nor do we mean blameless debt: that which is completely unavoidable, if, say, you get made redundant and have financial commitments, or a business fails, and your finances go into freefall. Likewise, if you're a student it's practically impossible not to get into debt - unless you're one of those weirdoes who manages to make a profit on your grant by having three years of precisely no fun.
This leaves what could (sort of) be called 'voluntary' debt. And yes, sometimes this involves bewildering stupidity: people who don't realise that maxing out eight different credit cards with an income of £16k is going to lead to problems somewhere along the line. But mostly it seems to be that people simply don't know what they're getting into.
And all of this is fuelled by the fact that it's *phenomenally* easy to get into debt. It seems that whatever your financial track record or income, you'll be bombarded with credit card and loan offers. Just got a £1.12 increase in your monthly housing benefit? Why not apply for our Platinum Debt Card, valued customer?
And once you've got all the instruments of debt at your fingertips, it's easy to get into the proverbial downward spiral. Credit cards (which are basically high-interest loans without the paperwork) can be incredibly handy in the short term (and indeed extremely good fun) but it's easy to get into a hand-to-mouth debt situation where you clear a credit card bill rather than pay the charges, then realise you've got to pay the rent, and suddenly you don't have any wages left and shit you've got to pay the dentist but at least the credit card's cleared, still you can increase your overdraft - but the bank will only give you an extra £200... still there's the other credit card you don't use...
Repeat this process a few times and suddenly your bank will offer you a loan to 'clear' your debts - but they'd advise borrowing a bit more on top to get a lower interest rate... and have a holiday, maybe? Great, why not? But by the time you start to think about where you want to go you've used the excess cash to pay off your other credit card... it's a painfully familiar situation, and if it hasn't happened to you it's probably happened to someone you know. And let's face it - most of us are just a bit shit at money. It really may be no more complicated than that. How many people can honestly say they budget? And when your finances start to go wrong, frankly it's the natural thing to try to ignore the problem and just hope that things will get better.
So who's to blame for all this? It's hard to feel much sympathy for people who can't see that an X-Box 360 might not be absolutely necessary when they're two months behind with the rent. Nor has a bank ever forced anyone to go into debt at gunpoint, but at the same time the way banks and building societies relentlessly push loan and credit services is surely highly morally questionable.
Still, being in debt has become normalised, so maybe bankruptcy will too. Perhaps in a few years' time we'll all be having conversations like these:
'I'd get the drinks in but my financial trustee won't give me any spending money until 2051'
'We met on the insolvency section of Guardian Soulmates.'
'Hey, haven't seen you since debtor's prison!'