Primera fase

especially true if couples have incurred debts without letting the

other know, with some actively hiding debts from their partner.

Couples find it hard to talk about money, meaning by the time they

really begin to talk about their debts it can be too late, both to

save their financial position and their relationship.’

ee

3.2.1 Driving debt

The breakdown of a family can impact almost every part of their life including the family financial situation. It is estimated that nearly seven million people in Britain suffer financial problems as a result of a failed relationship.453 _{In 2012 debt advice clients who attributed their} debt to relationship breakdown owed an average of £17,629 in unsecured debt, and had just £25 each month available to meet debt repayments.454

There are many financial implications associated with divorce or separation both direct and indirect that can lead to financial troubles. Firstly, at an average of £1,300 the cost of the divorce itself is significant, especially if lawyers are necessary or the separation is contested.455 _{Secondly, the rapid sale and division of assets, including a family home,} can result in them being sold under market value and possibly even for negative equity. Lastly, household bills often fall in arrears due to confusion or disagreement over who is responsible for paying bills.

Financial troubles relating to family breakdown can continue after the immediate separation. Joint loans, joint accounts and other joint financial agreements can be difficult to end and failure to keep up with repayments during separation can have a negative impact on credit ratings. Similarly, disagreement over childcare payments and the cessation of other financial arrangements agreed to during the relationship can place a significant financial burden on one or both of the parties, driving people into problem debt.

For such reasons family breakdown is one of the most common causes of problem debt cited by those accessing the help of debt advice charities. Separation or divorce was the primary cause of problem debt for 16 per cent of Christians Against Poverty’s clients and for about one in 10 of StepChange’s clients.456

Problem debt caused by relationship breakdown is often more of a concern for women. Over the past three years the percentage of women citing family breakdown as the primary cause of their debt was almost double that for men.457 _{One possible explanation for this is greater} proportion of men who are the sole earners for their families.458 _{Similarly, given the still} unequal distribution of caring responsibilities, women are more likely to have been out of the job market for some time while raising children, meaning it can be harder to find employment following divorce or separation.459

453 The Telegraph, Failed relationships hit credit status, 26 Feb 2013 [accessed via: http://www.telegraph.co.uk/finance/personalfinance/ consumertips/9895292/Failed-relationships-hit-credit-status.html (17/10/13)]

454 StepChange, Press Release, The Debt Cost of Divorce, 11 September 2012 [accessed via: http://www.stepchange.org/news/ Thedebtcostofdivorce.aspx (17/10/13)]

455 Williams G, Legal Services Benchmarking, Legal Services Benchmarking, 2012, p99 [accessed via: https://research.legalservicesboard.org.uk/ wp-content/media/2012-Individual-consumers-legal-needs-report.pdf (17/10/13)]

456 Christians Against Poverty, CAP client report 2012, Bradford: Christians Against Poverty, 2013. StepChange, Statistical Yearbook 2012, London: 2013 [accessed via: http://www.stepchange.org/Portals/0/Documents/media/reports/statisticsyearbooks/Statistical_ Yearbook_2012.pdf (16/10/13)]

457 Ibid

458 ONS, Women in the labour market, London: ONS, 2013 [accessed via: http://www.ons.gov.uk/ons/dcp171776_328352.pdf (24/10/13)] 459 Women & Equality Unit, The impact of women’s position in the labour market on pay and implications for UK productivity, London: DTI,

Even when family breakdown is not the primary driver of debt, people who have experienced family breakdown are often more susceptible to falling into problem debt. Whereas 12 per cent of people in England and Wales are divorced or separated, 16 per cent of CAB debt advice clients were divorced or separated.460 _{Similarly, single parents often struggling on} low income seem to be much more vulnerable to problem debt and are overrepresented amongst debt advice clients.461

The CSJ has heard how personal debt has come between couples, leading to family breakdown that can have a human impact far greater than the size of the debt that caused it.

460 Citizens Advice Bureau, Debt advice statistics – in evidence to the CSJ 461 Ibid

462 Case study provided by StepChange

Mandy and her ex-husband both had unhappy childhoods. They wanted to give their children the best childhood they could provide. Unfortunately this meant that they were spending way beyond their means.

They re-mortgaged their house several times and had numerous credit cards and loans. It was an unhappy marriage but debt and money worries were ‘a big reason’ why it broke down.

Mandy attributes being ‘in denial’ about her financial situation to her depression and relationship difficulties. During her divorce, however, the full extent of her debt became clear.

As a result of the pressure of debt and divorce, Mandy attempted to take her own life.

She found StepChange online, owing £30,000 at that time. She has since remarried and is now under treatment with an outpatient mental health team, but is facing bankruptcy.

‘We re-mortgaged several times, but it was all around spending beyond our means and also a lot of it was from childhood difficulties, wanting to give our two boys the best possible childhood that myself and my ex-husband did not have.

‘When we started divorce proceedings [I] realised the extent of how many credit cards, how much borrowing, how many times we borrowed against the house and that’s when the impact hit, when we saw the lump sum. [We were] in denial prior to that. I’ve had depression for a long time and my depression just got worse – so I guess my depression also meant I was in denial.

‘[The debt is] still in my name, [my ex-husband] paid what he felt was half his share but I decided at the start of the divorce proceedings that I was not gonna battle him and that was a decision that I made because I did not want to go through with solicitors because of my mental health…[and] I did not want to involve my children.’

ee

3.3 Worklessness

Living with the burden and mental stress associated with problem debt can have a significant negative impact on people’s ability to be productive at work and can prevent those who are unemployed from finding work. The knock-on economic effects are borne both by the state, in terms of benefits for the unemployed and by the economy as a whole in terms of lost productivity. Being unable to work or find work can also exacerbate debt problems, keeping people trapped in debt, as they are often unable to finance their cost of living or begin to repay their debts.

The all-encompassing nature of problem debt can distract people from their job and hinder their performance. Citizens Advice found that half of people struggling with debt reported it had affected their performance at work.463 _{For some the stress associated with debt is even} more serious, with a survey finding that 19 per cent of people with problem debt (42 per cent of those currently in work) had to take time off work as a result of stress, with one in 10 giving up their job as a result of their debt problems.464

Problem debt can act as a barrier to finding work. Not only does debt serve as a distraction from searching for work, as the primary concern is often resolving debt issues, but there are practical barriers too.465 _{Debt problems can make it difficult to afford the essentials necessary} when searching for employment including transport, training and appropriate clothing and supplies.466 _{One survey found that around one in five found it difficult to find employment} as a result of their debt problems.467 _{Part of this may be attributed to the decrease in self-} confidence experienced by those struggling with problem debt.468 _{There are also several} debt resolution methods, especially the Debt Relief Order that may discincentivise work, something that will be discussed in Chapter Four.

The impact problem debt can have on worklessness is of particular concern as work is the best route out of poverty. Also, worklessness is a key driver of problem debt meaning people can become trapped in a cycle of debt and unemployment.

463 Citizens Advice, Press Release, 3 in 4 of those in debt say money worries are harming their health, 17 December 2012 [accessed via: http://www.citizensadvice.org.uk/index/pressoffice/press_index/press_20121217.htm (17/1-/13)]

464 Legal Services Research Centre, Helping Hand: The Impact of Debt Advice on People’s Lives, London: Legal Services Research Centre, 2007 [accessed via: http://www.justice.gov.uk/downloads/publications/research-and-analysis/lsrc/2007/Impact.pdf (16/10/13)]

465 Gibbons D, Out of work and out of money, Manchester: Manchester City Council, 2010 http://www.responsible-credit.org.uk/uimages/File/ out-of-work-and-out-of-money-final(1).pdf

466 Ibid

467 Legal Services Research Centre, Helping Hand: The Impact of Debt Advice on People’s Lives, London: Legal Services Research Centre, 2007 [accessed via: http://www.justice.gov.uk/downloads/publications/research-and-analysis/lsrc/2007/Impact.pdf (16/10/13)] 468 StepChange, Statistical Yearbook 2012, Leeds: Foundation for Credit Counselling, 2013 [accessed via: http://www.stepchange.org/

Portals/0/Documents/media/reports/statisticsyearbooks/Statistical_Yearbook_2012.pdf (16/10/13)]

‘I was trying to survive, struggling to fight depression everyday. I