Citizens Advice says number of people seeking help with debt jumps 11%

Citizens Advice says number of people seeking help with debt jumps 11%

The number of consumers seeking guidance for spiralling debts has jumped by more than 10% over the last year, according to the charity Citizens Advice.

The figures heighten fears that a hike in interest rates later this week will result in thousands more families facing bankruptcy.

Citizens Advice said consumers were coming to its advisers with bigger debts than ever before after spending on the high street using credit cards, unsecured personal loans and bank and building society overdrafts.

It said its network of advice bureaux handled 1.4m debt problems in the year to April 2006, an increase of 11% on the previous 12 months.

Many were close to defaulting on mortgages and secured loans, which the charity said was one of the fastest growing problems.

The report comes only a few days after figures showing personal insolvencies rising at an annual rate of 55% and on course to break through the 100,000 barrier for the first time.

Separate figures emphasised the impact on families, many of which were having trouble making their monthly mortgage payments.

Department of Constitutional Affairs data showed that lenders started 34,626 home possession actions in the three months to September, the highest figure since the recession of the early 1990s.

Liberal democrat Treasury spokesman Vince Cable has called on the government and major lenders to tackle the problem of rising personal debt. He argued banks and other finance.....continued below

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companies were often caught lending to vulnerable people, many of them already in debt.

Controversially, tens of thousands of people opt for an individual voluntary arrangement with their creditors which can cut their debts by up to two-thirds. Others turn to specialist lenders that consolidate loans in one "super loan".

Both options can involve paying large commissions to private debt advisers. Debt Free Direct and Accuma, which process thousands of IVAs, recently reported rises in profits of more than 100% over the last year.

Citizens Advice, which offers free advice, said that while catalogue and mail order debts remain the largest source of problems, accounting for 824,000 enquiries, housing debt was one of the fastest rising types of categories.

Of the 127,000 housing debt problems brought to Citizens Advice staff nearly 10,000 concerned threatened repossession and 2,000 concerned actual repossession or eviction.

It said: "These figures bear out the findings of an NOP survey for Citizens Advice published in September showing that some 770,000 people had missed at least one mortgage payment in the previous twelve months."

Council tax debt problems handled by bureaux went up by almost half to 89,000, and debts from unpaid bills on gas, electricity, telephone and water were up by 19% to 90,000.

In one case a couple with several outstanding debts, including a £15,000 secured loan, failed to make four consecutive payments, resulting in a possession by the loan company.

"The company offered the clients the option of agreeing to pay an additional £100 per month so that they would not have to appear in court. However, the clients visited the bureau who explained the importance of attending court and making an affordable offer towards the arrears," said a spokeswoman.