Council tax warning issued as personal debt reaches £25,000 per person – what to do

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Debt levels skyrocketed in 2021 according to analysis from money.co.uk, which showed the average Briton will end the year with total debts of more than £25,000. Coronavirus, the ongoing pandemic and recent increase in living expenses are all combining to exacerbate this problem and guidance has been issued on what debts should be prioritised.

Money.co.uk found around six in ten (59.7 percent) consumers admitted to being in debt right now, not counting mortgages, with the average amount owed in the UK in 2021 coming in at £25,879 per person – more than double the figure in 2020 (£9,246).

Almost a third (32.24 percent) of debt incurred this year has been due to living expenses such as bills and food, down from 35 percent last year, while the coronavirus pandemic accounted for another 31.74 percent, down from 36 percent in 2020.

Notably, the number of people citing redundancy as a result of coronavirus as the reason for their debt has jumped from 7.8 percent last year, to 9.72 percent in 2021, which Money.co.uk noted is a possible outcome of the furlough scheme coming to an end on September 30.

The data showed men (£35,013) have more than twice the debt of women (£14,911), while Britons aged between 35-44 have more debt than any other age group, averaging £53,283 per person.

Christmas also made these problems worse for many, with more than one in five (21.86 percent) attributing their losses to the expenditure of the winter period.

While facing these mounting debts may seem daunting, identifying what specific bills should be covered first will prove to be a crucial first step.

James Andrews, senior personal finance editor at money.co.uk, explained: “Given the challenges faced by consumers in the past 12 months, it’s no surprise personal debt is high, but for it to more than double in a year to £25,879 a person is extreme.

“Almost two years on, nearly a third of consumers still attribute their losses to the pandemic, while a fraction more say that living costs are the main cause of their debt.

“This will come as no surprise to anyone who has tried to change their gas or electricity supplier or filled up their car in the past few months; prices are at an all time high and show no signs of dropping in the foreseeable future.

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“If you’re struggling with multiple types of debt, putting the most important debts first is key.

“Missing repayments on secured debts, such as a mortgage, may result in your home being repossessed while not paying council tax can result in you being put in prison. These should be top of the list.

“If you would like help prioritising, or are struggling to meet payments, there are free services available that will help you review your finances.

“Citizens Advice will offer free, impartial advice, or alternatively you can contact a debt charity like Step Change who will be able to offer support.”

Those facing debt problems may also be able to receive support through the Government’s Debt Respite Scheme, also known as the Breathing Space scheme.

This scheme, launched in May 2021, allows people to get relief from some of the pressure of dealing with creditors. A debt solution plan can also be set up, allowing debtors to not worry about being chased for payment or incurring extra charges.

If a person passes certain eligibility checks, their creditors won’t be able to add interest or fees to their debts, or take enforcement action, for 60 days.

It should be noted Breathing Space is not a payment holiday and as such, claimants will have to continue paying their debts during this time, but it does prevent action from being taken against them if they’re unable to pay.

The Breathing Space scheme is only available to those in England and Wales, with similar support being available in Scotland.

To be eligible for the support, claimants cannot have another formal debt solution, such as a Debt Relief Order, Individual Voluntary Arrangement or bankruptcy.

At least one qualifying debt will be needed and this can include credit cards, personal loans or overdrafts. Many priority debts, such as rent arrears, fuel arrears and council tax arrears will also qualify.

To apply for the relief, Britons will need to contact a debt advisor such as StepChange Debt Charity.

The debt adviser will ultimately advise on whether Breathing Space is suitable for the claimant while a longer term debt solution is identified.

Lorraine Charlton, Debt Expert at Citizens Advice, concluded: “Most common types of problem debt would be qualifying debts in Breathing Space. This includes priority debts – like rent arrears or council tax debt – that can have particularly severe consequences when you can’t pay them.

“Your debt adviser will work with you to find the best way forward. That might involve applying for Breathing Space to buy some time while you choose the right debt solution to fit your circumstances.”

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