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Single Parents in Debt — a Hidden Problem

Many people live with the trauma of money worries for years before beginning to seek help or exploring their options. Such concerns are especially acute for single-parent families who, naturally enough, struggle with higher household and living costs associated with running a family home. With the rise in living costs increasingly accompanied by pay freezes, disposable income for single-parent families is being squeezed like never before.

Single parents are particularly vulnerable in this regard as they have to manage household costs with only one source of income, often relying on credit cards and other means of finance. Childcare costs (prohibitive in any case) is another obvious contributory factor to the problem. Throughout 2020, single-parent families were forced into difficult situations when the COVID-19 global pandemic took hold. Debt charity Gingerbread states: “Since the beginning of the COVID-19 crisis, single parents have found themselves disproportionately impacted by nationwide measures to limit the spread of the virus.” But, even without the devastation of the global pandemic, “82% of single parents said not having enough income to meet living costs meant they were forced to borrow money and ended up in debt.”

What Financial Help Is Available to a Single Parent in Debt?

Single parents are far more likely to work on low incomes than other employees. The reasons for such hardship are largely self-explanatory but include such things as having to find work with hours that accommodate childcare or the ability to take time off at short notice. The impact of such issues are also easy to understand. Single parents have long been one of the most disadvantaged groups in society, and the myriad of welfare changes in recent years has only served to make their life more difficult.

The fall in benefit income hit families hard throughout the UK. Parents are struggling with money worries in greater numbers, and it’s easy to see how the problem is magnified for families with just a single parent to provide. Despite benefits being gradually eroded in recent years, essential household bills still need to be covered. Rent/mortgage, utilities, council tax, water rates and other vital expenditure still needs to be paid. Childcare can also be an extremely costly burden for single parents. And that’s before discretionary expenditure — such as leisure activities — is even taken into consideration.

Those in employment will request more working hours to earn more money for debt payments but childcare costs mean that this becomes counter-intuitive. Parents on a low income are entitled to certain benefits, including Universal Credit, which works to top up a lower wage/salary. There are also benefits such as Housing Benefit and Council Tax Benefit, as well as help with paying mortgage interest. You can find out what is available to you on the Single Parent Action Network, or try using one of the benefits calculators featured on the .gov.uk website.

Problem Debt for Single Parents on the Rise

Debt for single-parent families can cause more than just financial hardship, many are struggling to even feed their families and it’s beginning to take a toll on their mental health. A recent study coordinated by Stepchange in conjunction with Gingerbread found that of all single-parent families that took part in the study:

  • 51% had fallen behind on making rent or mortgage payments as a result of making debt repayments.
  • 19% of single parents had to use food banks as a result of making debt repayments.
  • 69% of single parents who were in debt reported struggling with their mental health, and 68% of indebted single parents suffered from depression specifically.

The huge issue for single parents when it comes to problem debt is being able to increase the household income enough that they can afford the debt repayments. Unfortunately, for those who don’t have family members to help out, childcare costs increase significantly, and it becomes more difficult to keep up with payments.

This is how the “debt spiral” begins for single parents. Being unable to afford things without borrowing, being unable to make repayments without working more, being unable to work more without increasing childcare costs — all of these, in turn, lead to defaults on repayments. Getting behind on council tax, mortgage or rent arrears, utility bills and other household bills can lead to serious problem debt and even calls or visits from debt collectors or bailiffs.

It is important to know your rights and the help that is available to you at this point. Creditors, collection agencies and bailiffs must abide by certain rules and behave accordingly. Take a look at Debt Movement’s Debt Help section about bailiffs and debt harassment.

Where to Get Debt Advice for Single Parents

As with any debt issue, the key is to seek debt advice and guidance as soon as possible. No matter how severe the problem, or how bleak the situation might seem, help is always at hand. Just like many other disadvantaged groups in society, single parents have enough to worry about without the added stress debt causes. In the first instance, it is important to get in touch with a debt charity, such as the Money Advice Service, Step Change or Gingerbread. These charities can assess your current financial circumstances, give debt advice about the specific creditors you are in debt with and give you advice as to what may be available to you in terms of benefits and grants. The charity will also give debt advice with regards to whether a debt solution is a viable option for single parents.

With so many debt solutions available, there is no need for single parents to struggle unnecessarily with money worries any longer.

Debt Solutions Available

If your debt has gotten to the point that you would not be able to pay back the money owed within what is considered a reasonable amount of time — and your creditors have begun proceedings such as collection agents, bailiffs or county court judgements (CCJs) — it is probably time to consider a debt solution that can help you to get back on track.

There are several options for single parents when it comes to debt solutions. If you know that you can afford to make your regular payments but need help with consolidating your debts, a Debt Management Plan (DMP)  or Individual Voluntary Arrangement (IVA) may be the best option for you. However, if you are in the position that many single parents find themselves in whereby they can see no way that they will be able to meet repayments, a debt solution such as a Debt Relief Order (DRO) may be better suited.

A DRO is a debt solution for those who have no assets or monthly disposable income to use toward paying back their debt. It is an alternative to bankruptcy for non-homeowners with less than £1,000 in assets, creditors of less than £20,000 and a disposable income of less than £50. A DRO will freeze all interest and charges being added to your debt, and as long as your circumstances haven’t changed in the 12 months that you are in a DRO, the debt is written off at the end.

An IVA is a legally binding contract between you and your creditors. It will mean that they will stop contacting you for payment, and any further action, such as bailiffs, will also cease. Your IVA provider will calculate monthly payments based upon what you can reasonably afford. These payments will be paid monthly until the end of the IVA term, usually five to six years. At the end of your IVA term, you will receive a certificate of completion and the remainder of your debt will be written off.

An IVA is a viable debt solution for single parents in a situation that has led to problem debt with no way of paying their creditors back in full. Whether  you are a mum, dad or guardian in a single adult household and in need of a debt solution to get you on the road to financial freedom, contact Debt Movement today for friendly and impartial guidance about the debt solutions available to you.