This is a subject that has been around for some time but is every bit as topical today as ever and is one which many people have clear views on with the two ends of the argument scale being:
• People should quite simply be able to write of their debts if they can no longer afford them
• People need to be responsible for their own actions and therefore must repay the debts they have run up
There are also a lot of views in between, the main one seeming to be that people should be made to pay back what they can afford but not be forced to pay back what they can’t afford; although, some would see this as just a variant of the first argument detailed above.
Writing off debt should not be allowed
Allowing people to easily write off their debt is the wrong approach and sends out the wrong message to society. It encourages people to spend what they don’t have and instils a recklessness in how debt is managed. It enables that proportion of society who show no responsibility to spend and benefit from that spending in the knowledge that they can just cast the debt aside when it suits them. People will play the system to their own advantage and to the detriment of others if we let them.
It is unfair on the rest of us, as in the end we all end up paying for the debt that is written off in the way of increased interest rates and charges. It sets a bad example to the younger generation who can see what others do and who may follow likewise.
So the whole idea of making it easy for people to write of their debt responsibilities is an unwanted burden on the members of society who conduct their finances in a responsible manner and is not a mode of behaviour we should want to encourage. It can set an unhealthy example for others to follow and could lead to a spiral of uncontrollable debt levels and mass write offs at a huge cost to society.
We should initiate a system of stricter controls on the availability of credit, make it more difficult to write off debt and some of the money saved could go to a fund that provides education on managing finances, good debt advice and initiatives that encourage a more responsible approach to debt in the first place.
We need a release valve for debt problems
Research shows that most people who have debt problems would rather not have them and they have not reached their adverse financial situation by wilful neglect of their finances. Debt help organisations will also point to the fact that many people with debt problems simply can’t resolve them on their own, they just don’t have the money to pay off what they owe.
There can be very specific reasons that can precipitate a debt problem such as someone losing their job, the closure of a business or someone falling into ill health. This can mean that people who have never had a debt problem before can find themselves in the situation where they cannot repay their debt, the problem gets worse and they need a proven and recognised method to resolve their situation.
One thing that is clear about being in debt is that it can be a very unpleasant situation. Worry, pressure, anxiety, sleepless nights and feelings of hopelessness and fear can become totally overwhelming for many people struggling with debt. This can lead to emotional, psychological and relationship issues which can turn into long term problems.
The demands from creditors, debt collectors, and the process of legal action can be a seemingly never ending nightmare which needs a structure and regulated process of resolution. This resolution needs to be a process where the person who owes the money can agree a repayment structure that they can afford for a reasonable period of time and the only option then is for the remainder of the debt to be written off.
This is actually how the current system works when people reach a stage where they are effectively insolvent. Out of all the debt management solutions available it is only the current legal insolvency solutions that allow people the option to write off a proportion of their debt. This includes a standard IVA (individual voluntary arrangement) in England, Wales and Northern Ireland, and a Trust Deed in Scotland along with Bankruptcy across the UK.
It is also important to note that recent legislation changes across the UK have tightened up the procedures with a view to reaching a better balance between the interests of debtors and creditors.