As the credit crunch bites
Debt remains the biggest single area of work Stoke on Trent CAB deals with
In 2008/9 1,989 people received casework from our team of specialist advisers. This represented a 16% increase on the previous year achieved with no additional resources.
New debt enquiries accounted for 37% of all the new advice issues brought into the bureau, and we helped people deal with £17.3 million worth of debt. The relatively low average debt per case of £8,700 reflected two notable trends from the year. Many people are now approaching us for help earlier, well before their debts have escalated to unmanageable proportions. Also the underlying poverty in the area limits the amount of money people can borrow and thus the amount of debt they can accrue. Stoke CAB's enquirers are generally among the poorest of the city's residents which further compounds this latter factor.
Two thirds of the debts dealt with were unsecured loans and other credit debts while a third were priority debts, predominantly secured loans and mortgages, reflecting the rises in mortgage arrears and repossessions which we witnessed during the year. Council tax arrears are another prominent debt and the Bureau helped people deal with over half a million pounds worth of council tax arrears.
"One of the most significant improvements in the last 12 months has been the relationship we have developed with the City Council's Council Tax Recovery Office," said Debt Team Co-ordinator Jayashri Lowe. "We have developed a really effective partnership with them which has lead to the establishment of a council tax clinic system which gives them the facility to refer council tax payers in arrears to the Bureau and gives us the opportunity to get quick and easy access to Council Tax Recovery Officers so we can negotiate affordable payment arrangements as conveniently and promptly as possible.
"We have also been able to challenge the inappropriate use of Bailiffs far more easily and far more effectively and are delighted to see the city council responding far more positively when we raise these issues.
We fully understand the council's duty to collect the council tax as efficiently as possible but in the past we have been concerned by the indiscriminate use of Bailiffs to pursue debts from people with no assets and the difficulty we have had in getting more appropriate payment arrangements accepted. We are delighted that this has improved hugely," added Specialist Services Manager Andy Eardley-James
As long as the recession continues people such as those whose situation is described below will continue to need the expert debt advice provided at Stoke CAB.
Pictured: Stoke CAB Debt Team
Case Study
Rob was a 36 year old married man with three children who was unfortunately made redundant only six months after starting a new job as a Project Manager for a major national company. He owned his own home with a £76,000 mortgage and owed about £18,000 worth of unsecured debt.
Never having been unemployed before Rob was at a complete loss as to how to deal with his financial situation when he came to see us a month after his redundancy.
Caseworker Donna Savery was able to talk him through the process for signing on and claiming Job Seekers Allowance, Child Tax Credits and, most importantly help with his mortgage.
We then contacted Rob’s mortgage lenders on his behalf negotiated a reduced, interest only, payment and more suitable payment arrangements.
We then gave Rob advice on how to prevent himself getting behind with priority debts such as the water charges, gas and electricity payments and his TV licence. We gave Rob information about the social tariffs the utility companies offer, the instalment schemes available for other priority debts and information on free school meals. We also helped him claim council tax benefit. Rob was able to use this information to put in place suitable arrangements for his utilities and set up free school meals for his children.
Unfortunately, he will receive no help from the DWP with his mortgage for at least three months, the time everyone has to wait before mortgage interest support kicks in and Rob was unable to claim on his mortgage protection policy because he had not worked long enough with his current employer. His plight is all too typical of people who believe their mortgages are insured against any manner of eventuality only to get a rude awakening when they try and claim and find they have fallen foul of one of the many exclusions.
Having spoken to his mortgage lender we were able to advise Rob it was unlikely they would take any action within the first three months and once mortgage interest had kicked in, although they may start to take action on the arrears we would then be able to try and negotiate a suitable arrangement with them. We also contacted the City Council to explain the situation regarding his council tax, reassure them a claim for council tax benefit had been made and received assurance they would take no recovery action until that was sorted out.
Rob is confident he will be able to secure another job within the very near future, which will resolve many of his issues. However, if he is unable to do this we will review his debt strategy and provide further support.
Rob is clearly a very capable and articulate individual who is well able to manage many of his own debts given the right information,” said Donna Savery. “His case is a very good example of where we can work together with the enquirer to put in place a short term strategy to stave off the worst of the debt problems.
“Rob also knows that if the situation deteriorates or he is unable to get a job and needs to put in place a longer term debt strategy that we will be here to help him do that.”
Case Study
Bill had been a self employed sub contractor working in the building industry until the recession cost him his last contract. His wife Eileen has been unable to work for many years due to an industrial injury. When Bill discovered he was unable to claim Job Seekers Allowance they were at a loss to know how they would cope on an income which had been reduced by £1500 a month.
They approached the CAB for help and we have been able to negotiate lower and affordable payments on their £80,000 mortgage to a local building society, and have made token offers of £1 a month to the unsecured creditors to whom they owe £25,000.
For the time being their situation is stable, none of their essential services are under threat and they can keep their home.
Longer term we may need to consider options around mortgage rescue or other means of keeping them in their home if Bill is unable to get back into work in the near future which is quite likely given the current state of the building industry.
“Both of these cases highlight the situation imposed by many people who have lost their jobs in the recession and suddenly find themselves unable to service their debts,” said Debt Team Co-ordinator Jayashri Lowe. “As many people are confident they will find work again fairly quickly we are often having to draw up an initial short term strategy to help them manage their debts while pointing out to them they may need a longer term strategy such as bankruptcy or a debt reduction order if their circumstances do not improve in the medium term to bring their debts to a conclusion.”