Context

This research aims to add to the stock of evidence on the long-term impact of debt advice, and the impact of debt as something that affects people over time rather than being a relatively short-lived experience.

It benefits from being a longitudinal study investigating the following issues: 1) the transitions out of debt and, 2) the factors that enable people to make a transition out of debt – or the reasons why they are not able to do.

The study

The study follows the experiences of debt encountered by people on low incomes over a period of eight years. It began in 2007 with 59 low-income participants who had received debt advice. The participants were interviewed six times. In 2011 an additional cohort of 53 people who had experienced mortgage arrears was added.

Participants were recruited through six not-for-profit advice providers: two Citizens Advice bureaux, a national telephone helpline, and three community-based independent advice providers.

Key findings

• The study investigates how debt affects people over time and their transitions out of debt. Findings include the following:
• In general, debt advice had not necessarily led to people becoming debt-free, but had improved their ability to manage their debts, cope better, and in some cases prevent further personal financial decline.
  • At the end of the study, just over a third of participants described themselves as ‘debt-free’, but there are questions about the credibility of this claim. For example, a substantial number of ‘debt-free’ participants had declared bankruptcy, sold possessions or received gifts and inheritances, but had not seen a sustainable increase in their income. Only two participants had savings exceeding £1,000 and the majority had none. The proportion of participants that had become debt-free simply as a result of cutting back and saving more was very small.
  • Almost half the participants described themselves as ‘managing’ their debt. They typically had repayment plans in place with the majority of their creditors and anticipated that at some point in the future they would become debt-free. Three key factors were identified in relation to participants feeling that they were managing their debt: having payment plans in place with most or all creditors; being largely cautious in managing financial affairs; and having strong social networks that could provide financial and emotional support.
  • A third group of participants (the smallest in number) were still in debt at the end of the project and saw little possibility of moving out of debt. For some, they were managing their financial commitments to a certain extent and sometimes making very small repayments, while for others their debts were increasing. For these participants, the problem was a fundamental lack of money. The effects of significant, long-term health problems were also evident in this group.
• • Overall, participants were satisfied with the debt advice they had received and the lasting impact it had on their ability to manage their debts. Most were able to act autonomously upon advice they had received. However, a small group of participants required more ongoing, tailored support if they were to avoid their financial situation stagnating or even deteriorating.
• • There are a number of lessons to learn about how the debt advice sector manages complex debt cases. Having debt does not simply involve cash flow issues: the causes and experiences of having debt should be contextualised with reference to other issues, including health and well-being concerns, and matters relating to the family.
  • The impact of advice needs to be evaluated on more than just a simple measure of indebtedness: the impact on health, enabling people to cope better, and to avoid problems deteriorating also need to be assessed.
  • Some participants have had extremely negative experiences with creditors. The detailed proposals from StepChange Debt Charity relating to reducing creditor harassment and the imposition of burgeoning interest/charges warrant further attention.
  • For those with mounting mortgage arrears there is a strong case for the introduction of a ‘right to sell and stay’, so that anyone who can no longer meet mortgage repayments can sell their property to a registered social landlord but remain as a tenant paying a fair rent.

Points to consider

• • Use of a qualitative longitudinal approach increases understanding and produces broad insights, but great care must be taken in generalising findings and implying causality.
  • Taking a longitudinal perspective highlights the inadequacy of work on theorising debt and the development of associated typologies of debt which would help both to analyse debt and to structure discussion.
  • The report does not state how the term low income is defined regarding participants.
• • The study has significant relevance as there has been little evidence on the long-term impact of debt and debt advice.
• • The study is based on a relatively small qualitative sample that is not intended to be representative of the wider population. Whilst the issues raised in this study are likely to be found within the wider population of low income debt advice users, it is not known how common or uncommon their issues and experiences are.

Full report

Living with debt after advice: A longitudinal study of people on low incomes - full report