Debt denial threatens to swamp economy

The UK is enjoying the benefits of a strong economy and a booming housing market. The Bank of England has increased the interest rates three times in an effort slow the spending, and still the inflation rate rose to 3%.  

The analysts and economists are sharpening their pencils and trying to figure out why the UK economy is working despite everything they were taught about the ebb and flow of money in the fancy universities.

Unfortunately, there is a fly in the ointment.  One growing problem threatens to bring down the tidal wave to an abrupt halt – debt denial.  This is the nation’s dirty little secret. 

Debt denial is a serious problem for some people. They may not be debt-a-holics.  They are just consumers, like you and me, who lost control of their debts, and now have thousands of dollars in ‘secret’ loans and debts. Secret, is the operative word. Debt charities have cases where average people managed to accumulate more than £40,000 worth of debts without anyone knowing, not the bank, their friends, family, or even their spouse. 

The media has recently forced the nation to take a hard look at this group, because it isn’t a small or obscure group. It is large enough to bring the whole economy crashing around our ears.

These people are masters at the art of denial.  They hide the mail, become terrified of the telephone, and can go to great lengths at hiding their debts from those who live closest to them.

As irresponsible as this sounds, it wouldn’t be a problem if it only threatened to bring the economy down around our ears.  Face it people, the housing market crashed in 1991 and we brought it back.  If there is one thing that the UK population is good at it is ‘playing the global monopoly game.’

The biggest threat is to the social fabric.  Debt denial is tearing families apart, and leaving single parents with children to raise and thousands of dollars of debts to pay.  The person who suffers from debt denial can face stress, health problems, psychological problems, and an increasing number are turning to suicide.

A strong family can weather anything. A broken one is vulnerable.  The government needs to step in and take drastic action to stop this problem. Unfortunately, the government is missing the point.

They are instituting educational programs to help the younger generation learn how to manage their money.  That won’t help the younger generation if they can never attend college or university because they are working weekends to help their single parent keep a roof over their heads.

The time to take action should be now.  The government needs to help people learn how to deal with a debt denial sufferer in their own home, and they are sufferers.  Do not think of these people as fraudsters or criminals.  They are victims in this charade.

The banks are being given the freedom to access anyone’s credit information.  It is only a small step to allow a spouse to access their partner’s information, and to take action. 

Talk about a gambling addiction, and everyone understands the urgency. It is easy to equate a gambling problem to social issues like child poverty, spousal abuse, and a burden on social services. 

Drug and alcohol addictions are the same. The courts will force people into rehab, and you can protect yourself from responsibility for these people’s debts.

Debt denial is more insidious.  It creeps into the most obscure middle class suburban homes.  Children’s university funds disappear unnoticed for years.  Savings is eaten up.  These people don’t realize that the family living next door manages to survive without going into debt.

When confronted, these people have great excuses such as council taxes, increased utility bills, increased interest rates, and sometimes a family emergency.  It is easy to hide the problem until the court sends a bailiff to the door.  Then, it is too late to get help.

More people are learning that divorce will not protect you.  Many divorced people are now splitting up debts, not assets.

When it all comes down to it, we need to ask ourselves why we should care.  Is it our responsibility to help people who cannot manage their money?  The answer is ‘yes’ and ‘no.’ 

Of course we are not responsible for people who run up their debts.  However, we will all pay the price if the economy and the housing market crashes.  The people who suffer from debt denial will not lose their real estate or stock portfolios.  They will not experience negative equity in their homes. They will not see a life time of wealth building efforts go up in smoke.

This is one time when we need to put our foot down and demand that our portfolios and wealth are protected. We just watched the US sub-prime market crash. It doesn’t need to happen here. We don’t need to let it happen here.