Generation Y turns to Debt Relief Orders to deal with debt

More people aged between 25 and 34 are turning to Debt Relief Orders to deal with their debt problems than any other age group within the population, Insolvency Service figures sho

Related topics:  Finance News
Millie Dyson
29th December 2011
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The figures, taken from a preliminary analysis of 44,000 DROs in England and Wales over the first two years since their introduction, show that one in four people with DROs fall within this age group.

To help the young deal with their debt in the most appropriate and effective way, The Insolvency Service is running a 'Dealing with your debt' campaign with support from debt charities Citizens Advice Bureau, Money Advice Trust and the Consumer Credit Counselling Service.

The Dealing with your debt campaign aims to encourage individuals with debt problems to manage their debts responsibly if they are struggling with their finances and seek help earlier rather than later, and in particular:

- Where possible, avoid the pitfalls of taking out high interest personal loans, for example ‘payday’ loans, if necessary by seeking alternative forms of credit;

- Find out where they can obtain free debt advice, and;

- Understand the options available to them if they feel their level of debt is unmanageable.

A DRO is a formal insolvency process that is aimed at people who have modest levels of debt and no realistic prospect of paying it off, and who have little surplus income and minimal assets.

DRO figures over the last two years show that one in three people under 25 who were given a DRO owed less than £5,000, whereas all other age groups typically owed more, with some 40% of over 25s owing between £10,000 and the maximum allowable debt in a DRO of £15,000.

Stephen Speed, Chief Executive, The Insolvency Service said:

"Owing more money than you can afford to repay is a daunting prospect, especially when you’re young, but there are a number of options you can take and there is help available. I would encourage people struggling with debt to read our publication, In Debt? Dealing with your creditors, and to access free advice from debt charities at an early stage.

"If used correctly, a DRO can help people to address their debt problems and start again with a different attitude to credit and debt."

Gillian Guy, Chief Executive, Citizens Advice, said:

"After Christmas, Citizens Advice Bureaux see more and more people coming to us in debt and having problems making ends meet to cover even essential household bills. While money problems don’t go away by themselves, the good news is that free help is available.

"Trained advisers can help you prioritise your debts, negotiate with creditors and provide advice on a range of debt remedies so you can find an option that is right for you. If you are worried about your finances, don’t delay, get help."

Una Farrell, spokesperson, CCCS, said:

"These figures highlight the difficult financial situation that many young adults are in. Generation Y faces a future of higher debts and fewer assets than older generations. It is therefore crucial that they are aware of the free debt help that is available and don’t exacerbate their situation by paying for debt advice if they find themselves struggling to keep up with their credit commitments."

Joanna Elson, Chief Executive of the Money Advice Trust said:

"Many struggling 25-34 year-olds might have expected to be further up the financial ladder by now. At the same age their parents would most likely have bought their first home, have a comfortable pension lined up, and be saving for the future. For today’s 25-34 year-olds the picture is much bleaker.

"The good news is that help is available and free advice services can make a big difference. It is vital anyone struggling with their finances is aware of charities like National Debtline, CCCS and Citizens Advice."
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