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The levels of personal debt incurred by young people today are creating a generation of people locked out of acquiring property and other assets that previous generations have enjoyed, according to a recent CCCS report ‘Debt and the Generations’.

Young people are increasingly concerned about their debt problems

The report states that consumers are now ‘acquiring large levels of debt, especially unsecured debt, much younger’ and, that, ‘due to rising house prices and reducing incomes it seems unlikely that younger households will be able to acquire assets in the same way their parents and grandparents did.’

The report also identifies the impact of rising student loan debt on the ability of young people to acquire wealth. And it is no surprise to read in the report that those who cannot count on help from ‘the bank of mum and dad’ (or mummy and daddy), will be more affected by debt, thereby exacerbating existing inequalities.

 

Economics for the Debt Generation

Faced with such a bleak future and a system that is so weighted against them, young debtors need to take a step back and think purely in terms of self-interest and look at the cold, hard economics of the situation: would it be more financially advantageous to default on their debts and have them written off and then begin the process of saving?

It's all about freedom

It would be fairly easy to sit down and work out how long it would take to pay off existing debts, as well as calculating how little could be saved during the years of debt repayments, then compare this to the amount that could be saved during the same period if there were no debts to pay. Without debts to pay it is highly likely that if an individual were so inclined, that by the time their debts would have been paid off that they could have saved enough money for a large deposit on a house. Of course, if you default then your credit rating will be bad for 6 years but it is likely to take debtors far longer than 6 years to repay their debts, so for most debtors, default will still make sound economic sense.

Above all, it is simply a financial decision, the type that big banks and financial institutions perform daily and without emotion or moral considerations clouding their judgement.

It is important to remember that not everyone is obsessed with getting on the property ladder but the same logic applies to young debtors who just want to live.

The essential question that every debtor should be asking themselves

One thing to investigate when considering default is the prospect of post-insolvency restrictions such as Income Payment Orders, but these can be avoided, principally if you happen to be unemployed at the time of your insolvency. This was how it turned out for me and is something I explained in my book. However, while I could have used the last few years to save, I preferred to invest in myself and work fewer hours in order to pursue creative projects. Whatever your goal, the question of debt always boils down to the same question: would default enable me to achieve what I want quicker than repaying my debts? This is the essential question that every debtor should be asking themselves.

Other key findings of the CCCS report:

• Increasingly first time buyers (FTBs) can only get onto the housing ladder with help from the ‘bank of mum and dad’ – 45% of all FTBs in 2010 received financial assistance, compared to 20% in 2005. For FTBs under 30, 84% require financial assistance in order to buy. This is leading to the exclusion of poorer young households from the housing market and perpetuating existing disparities in wealth within generations.

• The decade in the run up to the financial crisis saw a huge transfer of wealth from younger home buyers to older generations through the mechanism of rising property prices, and taken together the over 60s now own nearly half of all net assets in the UK. In contrast the under 30s own just 5%.

• Student loans will also impact on the ability of younger households to acquire wealth. Total student debt outstanding is expected to grow to £153 billion in real terms by 2031, with loan repayments amounting to nearly £7 billion a year. With student loan repayments reducing available income, future generations will find it difficult to save or invest in pensions until they are older, which will impact considerably on their quality of life when they reach retirement age.

The number of asset-less debtors going bankrupt has reached such levels that the cost of processing these bankruptcies is becoming unsustainable for the Insolvency Service, according to Stephen Speed, chief executive and inspector general of the Insolvency Service, who was speaking at the recent Insolvency Today annual conference.

While this news of asset-less debtors using our easy bankruptcy laws to start afresh is encouraging, Speed also said that a point had almost been reached whereby taxpayer money would be required to cover the shortfall of the processing costs, which, according to reports, seems likely given that the Insolvency Service was forced to write of £81 million earlier this year.

Try the Banks

No, you're not having any of it back

Following the great taxpayer robbery of the banking bailouts – where free-market profit-chasers brought the world to its knees with their financial jiggery-pokery and eye-watering bonuses and then went cap in hand to the state when it all blew up – the idea of more taxpayer money being required to plug a hole, this time to cover the mistakes of individual borrowers, will no doubt result in more opprobrium being directed at debtors by the more pious sectors of society. Yet, and now stop me if this sounds ridiculous, surely it would be better to assess each individual’s case and try to determine whether the lenders had been at all culpable and had irresponsibly lent to people they knew would have little chance of paying the money back?

Making the banks pay for their mistakes and their greed – what a ridiculous notion.

Your bankruptcy will appear in the newspaper

To anyone who is maybe worried about their bankruptcy appearing in the newspaper, here I am talking about it in my home town newspaper. However, despite the publicity I am still a long way behind Kerry Katona.

You can view the pdf of the article here: Chron article 2

 

I was recently interviewed on the John Griff programme on BBC Radio Northampton. This was my first (and hopefully not my last) radio interview and it was a lot of fun. Amongst other things, we discussed my experiences of personal debt and bankruptcy which lead to me writing my book.

UPDATE: The interview is now available to listen to here.

I was recently asked by the guys from the Debtology website to write a guest post in response to an earlier article on the subject of bankruptcy (‘Bankruptcy – what IS the big deal?).

In my piece I talk about why we need our easy bankruptcy laws and also about how attitudes toward debt and bankruptcy are changing.  

If you are thinking about going bankrupt but are maybe worried about how you will be perceived, then you should definitely have a read.

The article is available here.

PS. If you are worried about debt and in need of free debt advice, then perhaps the guys from Debtology can help.

Talking about the Bankruptcy Diaries

A couple of weeks ago I was interviewed about my book by the lovely people at Hackney Hive. It was great to talk about the work and some of the issues around it. Thanks to all those at HH for showing their support for local artists. 

Below is an excerpt:

Hackney’s rich history has many aspects, but it is particularly feted for two things: being London’s revolutionary corner and its importance as an artistic hub. Often, these two collide and have provided many high points in Hackney’s cultural palette, especially its literary output. The best known of today’s Hackney literati is Ian Sinclair, a beacon for London literature. Lee Rourke is also proud to call Hackney ‘home’. It is time to welcome a new addition to Hackney’s artistic – and artistically revolutionary – spirit: Paul Broderick, author of the recently released The Bankruptcy Diaries. I was fortunate enough to be afforded a short audience with the author to talk about his book, why he wrote it and what he will be working on next.

“The Bankruptcy Diaries is truly a banquet for the soul of our modern moralists,” said Paul. “It’s one man’s journey – mine – from the youthful naivety of university and entering working life and my role in the broader fiscal complexities of the state to an enlightened awareness of the actual depth of today’s corporate exploitation of the individual. I present the work as a choice that many people are now – and many more soon will be – confronted with: levels of debt that can never be repaid. I took my choice on this – it’s all in the book.”

To read the rest of this article click here. 

Hello, I regret to announce that the previous author of this site, Mr. A.N. Other, is being retired, as there’s little point in remaining anonymous when you have book out with your name on it. Speaking of which, The Bankruptcy Diaries is being released next week. Below is the great blurb from the publisher, Revenge Ink:

Anyone can be king for a day... up to the limit on their card.

 It’s the year 2000 and Paul Livingson is in his first office job in Bristol. With student debts hanging over him, Paul still wants to live the high life: holidays in Europe, booze-fuelled nights of excess, designer fashions. But how to do it all? Easy! More credit! Spending gets even easier when Paul meets Kelly, an inspiring, free-spirited singer in a band with whom he falls in love. Written in the form of a diary, this book is about losing control and learning to regain it. It is about putting individuality above consumerism and asking who is responsible for the financial meltdown that more and more people face everyday. Is it all down to personal responsibility? Or does the system encourage massive debt that makes slaves of us all just for a handful of profits? An entertaining, honest and thought-provoking book that makes Lao Tse’s great point: doing nothing, everything is done. 

So, if you think that sounds interesting you can buy the book here.

Also, please visit the Revenge Ink website, as they’re doing some really great things. In the words of co-founder Amita Mukerjee, their books ‘are all about difference. Impossible to categorise, experimental, extreme, each one radically distinct from the other.’

A recent article by Lisa O’Carroll highlighted the interesting phenomenon of bankruptcy tourists from Ireland heading to the UK to discharge their debts. Due to more favourable insolvency laws – a bankrupt in the UK is discharged after just twelve months, whereas in Ireland it’s a draconian twelve years – Irish debtors are doing the sensible thing and crossing the sea for a quick release from debt.

Fish 'n' Chips, Tea, Becoming Debt Free

The most fascinating revelation in the article was that, ‘as few as 29 people were made bankrupt in Ireland last year’, a staggeringly low number considering the severity of the property crash in the Republic, especially when compared to the 79,000 who went bankrupt in the UK during the same period. It’s not difficult to deduce that the UK is effectively operating as Ireland’s bankruptcy court, which is considerably more helpful to Irish citizens than another bailout loan. Although ascertaining exactly how many of the UK’s bankrupts are made up of Irish citizens would be difficult, and clearly some Irish debtors will be eloping overseas without bothering with any formal debt discharge procedures (I would love to hear from you guys).

I just hope the message is getting through to the people at the bottom. The Irish banks have had their bailout, in turn subjecting citizens to some of the most brutal cuts in Europe. Now we hear tales of Irish property speculators bailing themselves out, by utilising UK laws. I’ve already called for a ‘People’s Bailout’, and now I extend this call to the people of Ireland – don’t be the chump left with a sackful of debt whilst everyone else extricates themselves from the mess. Get yourselves over to the UK and get rid of that debt!

Update: I have found a great article with information for Irish citizens wishing to go bankrupt in the UK. If you wish to know more then click here.

With massive student protests taking place in London today I’ve noticed a lot of web chatter about potentially putting oneself through university, racking up the fees and then declaring yourself bankrupt afterwards. A very shrewd move. However, this loophole was closed years ago after a few canny students began doing this. But the idea is a good one.

Sing for Free Education!

My advice would be to pay off the student loans with personal loans and credit cards before going bankrupt. However, one needs to be very careful here. The authorities are not stupid and could either reject your bankruptcy petition, or slap with you with a restriction order that lasts a decade. For this reason I would allow a good stretch of time to pass after paying off the student loans, keep racking up as much debt as possible – have ball whilst you’re at it – and then press the bankruptcy button a year or two down the line. I’m not sure whether this would work but I’d love to see somebody try. Well, it has been a day of protest and revolt…

Hello, I am a bankrupt.

 I am here to tell you how I took my life back from the clutches of the lending institutions, and to demonstrate how bankruptcy enabled me to change my life for the better.

No Laughing Matter?

By sharing my story I hope to bring attention to the issue of mass indebtedness afflicting our debt generation, and in this way hopefully bring about positive change.

If like me, debt has been an issue in your life, why not take some time out from worrying about how much you owe and have a look around. Through this site I intend to offer comfort, advice, and insight into all things debt related.

One thing I do insist on is that we are going to laugh along the way. Debt is such a dreadfully gloomy subject that it’s important to keep smiling. I think you’ll see what I mean.

I’m just getting started so bear with me.

A.N. Other

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