Debt: Banks moving in on unsecured loans
Court orders for debts up 42%
Friday, 25 Apr 2008 17:10
Court orders from lenders seeking to secure personal debt against property have risen 42 per cent from a year ago.
Applications filed for charging orders at the county courts of England & Wales stood at 131,644, of which 97,017 were granted in 2007, Ministry of Justice (MoJ) figures reveal.
The MoJ stated these figures are provisional but are unlikely to change.
Over the last two years, numbers of such court orders have risen nearly 100 per cent – as the UK's debt habit starts to bite back.
Repossessions due to personal debts – such as loans and credit cards – are low as those in debt faced with such charging orders either raise the funds or sell up to pay the debts.
However, the figures suggest a change in the way lenders approach debt.
Charging orders are used by creditors to obtain security for payment against a property owned by a debtor – in many cases a residential property, although it can be against land, commercial property or other assets.
Figures from Chiltern Debt Management released this week show the average level of debt for someone in an informal debt management plan has fallen to £25,945.
The firm's figures suggests the levels of debts people are accruing before turning to help is also falling – as the credit crunch makes borrowing harder and disposable incomes fall with rising energy and food bills.
Nathan Gladwell at Chiltern said: “People struggling with their finances need to readjust their spending to more realistic levels and be open to alternative options.
"Options like debt management can offer a valuable short-term solution whilst debts are brought under control, and they ensure that debts are prioritised so mortgage or rent and utility bills are accounted for first.”
Key indicators of debt stress include spending 25 per cent of income paying unsecured debts, having four or more debt commitments, and paying for day-to-day necessities with credit cards.
Also continually only managing to pay minimum balances on credit cards and store cards can be a warning sign.
Daniel Barnes