Chester-le-Street Named Debt Capital of the Country.

The market town of Chester-le-Street has the highest levels of personal debt in the country, according to a recent report.

Residents currently owe an average of £5,248 on credit cards and loans, in comparison to borrowers in Northern Ireland who owe the least with an average of £2,291.

The study carried out by the credit reference agency Experian, who published a national debt map of the country, aimed to give a truer picture of debt by stripping back mortgages.

However Chester-le-Street District Council has serious doubts about the report which named the town as being the most debt ridden place in the country.

They believe that Experian’s research was inaccurate as it cited Chester-le-Street’s population as being over 114,000.

But the council estimates it at being less than 54,000, of which only 43,000 are eligible for credit cards.

They also scrutinize the figures as according to Experian areas surrounding the Chester-le-Street District, such as Durham, Sunderland andNewcastle, are shown to have debt varying between £3,367 and £3,397 per head.

The Council believes this minor variance as being inconsistent as it suggests that people in the town have nearly £2,000 more debt than their neighbours.

A spokesperson for the Council said:

“We thought it odd that people in Chester-le-Street should have the highest personal debt in the country, so we requested the information as was sent to the media by Experian.

“We found that Experian had Chester-le-Street’s population down as over 114,137 whereas, we have less than half of that number living in the entire District. Imagine if Experian had published London’s population as 15 million, we are sure they would have been chastised for poor research.

“The Council just wants to put the record straight, and having asked them what data they have used to reach this figure, it turns out that they’ve included people from Derwentside, and both Tyne and Wear Valleys, leading to this inaccurate portrayal of Chester-le-Street’s population.”

North-East: Debt-per-Head (Source: Experian)

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Graeme Leigh, Financial Planning Consultant for Orchard Finance blames buying luxuries.

“The trend in the public’s debt seems indicate that it is general commodities such as iPods, large Tv's and foreign holidays are what most people are buying on credit.

“It is often the case that people are spending this money on credit cards simply due to ignorance. People seem to have forgotten the way in which the monetary cycle works, for example there will always be varying times of 'boom' and 'bust' in the economy. Furthermore the members of the public in their 30's haven't experienced economic decline during their adult lives and are unaware of how quickly the economic climate can change. For example last May most people believed the housing market was as strong as ever and within 12 months the public are now more cautious about investing in housing.”

Leigh, whose company is based in Chester-le-Street, doesn’t think it is going to get any better.

“It has been forecasted that the average mortgage will rise by £200 a month and as people begin to have less cash, then they will turn to the credit card to pay for their weekly takeaways for example. Unfortunately their reckless spending over the past 3 years or so will leave many people with high levels of credit already. Furthermore inflation will make this situation even worse. World inflation fuelled by China and India's previous acquisition of raw commodities such as oil has seen diesel and petrol prices rocket recently and with prices expected to reach £1.50 per litre many people with high credit levels may face bankruptcy. Depressingly, this is only the beginning of the problems people will face.

“This poor economic situation is only going to get worse.”

But Chester-le-street wasn’t the only place in the North East mentioned in the Experian debt survey.

Bishop Auckland was the second highest in the area with residents owing £3,691 of personal debt each. This was closely followed by South Shields, Darlington and Redcar.

The seaside city of Scarborough was the regions lowest with only £2,776 per person owed to credit card and loan companies.

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Debt: Just Easy Money?

With an average household debt of £9,052 and 292 people declaring themselves insolvent or bankrupt everyday, it is clear that consumer debt is not a new problem in the UK.

A recent study carried out by Experian, the credit reference agency, found that the residents of Chester-le-Street were in the most personal debt in the country with an average of £5,248 each.

Anne*, 23 from the County Durham market town was only 19 when she was declared bankrupt owing over £20,000 to credit card and loan companies.

She said:

“To me it was easy money. It was something I didn’t have to worry about straight away. I would always carry ID with me so whenever I went into a store and they offered me a 20% discount it was just far too easy to say yes and nearly every store would offer me a card. . People would see on my credit file that I had arrears and was missing payments but they would still give me more.

“I had nothing to show for the money I spend. It went mainly on trying to impress people, such as going on a night out where I would buy anybody and everybody a drink. On average a night out would cost me £150 and I would go out two or three times a week. “

The mother-of-one believes that the agony of telling her parents was the hardest part.

”I realised I was in trouble when I got my third loan for £15,000 at 19 year old and nobody would accept me for credit anymore. I had lied so much to my parents about all the post and telephone calls I was getting and it became too much. When I eventually told them the look of disappointment on my mam’s face is something I will never forget, she was ashamed off me.”

The procedure of declaring yourself bankrupt can take up to four weeks and involves applying to a court for an order to be made on your behalf.

However by paying off the debt, it doesn’t mean that all will be forgotten.

“I was very honest to the official receiver who dealt with my case. I had to make a payment arrangement with them and because I had a lot of disposable income I had to pay back £250 a month for 3 years.

“It has been hard. I have recently had a baby so I went to see about getting a mortgage with my partner. Even though I was discharged and paid most of the debt back, I basically got laughed out of the bank when I said I was bankrupt.”

This is a very common stumbling block amongst those with financial difficulties.

Becky Bowden Wilks from National Debt Line explains why.

“When ever you apply for a mortgage they will normally ask if you have ever been declared bankrupt and if you say no, you are making a fraudulent application for credit.

“It is going to affect your ability to get a mortgage and more importantly the interest rate that you are offered because lenders will see you as a higher risk. It can also affect applying for bank accounts. They could offer you a higher interest rate or not give you current accounts that have all the perks and the overdraft facilities with really low interest rates.”

But that isn’t the only restriction.

“The main thing is that it is going to affect your credit rating and it will stay on your credit file for six years. You also have restrictions on you for example there are some professions you can’t do such as being an accountant or a practising barrister or solicitor. Another constraint is that you can’t get credit for more than £500 with out the official receivers permission until you are discharged.”

Although in some circumstances it can’t be avoided, for others bankruptcy isn’t the only option.

“It depends what your situation is, for example say you’re a home owner and you have a large amount of equity then obviously bankruptcy probably isn’t for you because you have got equity and obviously you don’t want to lose your home.

“So in that instance we look at negotiating with your credits and try to negotiate a reduced offer of payment, something that you can offered or offer a voluntary charge on your property offer to them to secure the debt against the property so they have some security for it without actually forcing the sale of the house and forcing you in to bankruptcy.

“But if you do have a property that is in negative equity or you don’t own anything, say you’re renting or living with your mum and dad or something, you have lots of options rather than go bankrupt. You could apply for a full and final settlement of the debt, which is when you make an offer to pay the debt back at a higher rate than a bankruptcy settlement and they will decide whether or not to accept it.”

So in today’s current climate, with the increase of mortgage prices, higher interest rates and the “buy now, pay later” slogan on everything from sofa’s to holidays in the sun …is it really that surprising that more and more people are finding themselves in such sever financial difficulties?

If you want private and confidential advice on your finances, visit The National Debt Line website.

*Name changed for personal reasons