Teens Battling Huge Debts

People as young as 19 are running up debts that are three times as high as their annual income.

Professional services firm KPMG said the number of people setting up debt-managing individual voluntary arrangements last year soared by nearly 75% to more 16,000.

Around 45,000 people went bankrupt during the same period, estimates suggested.

Under an IVA, people reach an agreement with their creditors for interest on their debts to be frozen, in exchange for them paying back a set amount each month.

KPMG, which analysed data on IVAs for 2005, said the average person setting up one of the arrangements owed £60,000, but creditors expected to recoup just 38% of this sum.
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As a result it claimed creditors, such as financial institutions, were likely to write off at least £600m in bad debts from people taking out IVAs last year.

The group said the youngest person to take out an IVA among the cases it looked at was 19.

One other 19-year-old owed £25,000 after borrowing money to keep up with her friends' lifestyles.

Several people aged 21 owed around £40,000, with anecdotal evidence showing one man had racked up a substantial debt after buying three new cars in a year.

"The sort of debts we are talking about here are personal loans, credit card balances and other forms of buy now, pay later unsecured loans," said KPMG's Steve Treharne.

"Most of the money is borrowed to meet current expenditure, including lifestyle (purchases) such as holidays, rather than to acquire assets.

"Given the average level of debt, too many people are borrowing money that they have no realistic hope of repaying."

http://www.myvesta.org.uk

Sky News