For the sake of the children: tackling debt relieves pressure on families

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Children worry about arguments over money problems and financial future

One of the saddest legacies of the recession and the personal debt crisis it triggered is the effect it has had on the most vulnerable members of society - our children.

Families with problem debt try extremely hard to minimise the impact on their children but it can be difficult to explain why you can’t afford to buy a child something or to shield them entirely from the stress caused by money worries.

Half of kids in families with problem debt say it causes arguments

A report from The Children’s Society and StepChange debt charity found that there can be a devastating impact on children whose families are trapped in problem debt. More than half (58%) worry about their family’s financial situation while almost half (47%) say it causes family arguments. Children may be unhappy at school and may be bullied because they don’t have the same things as their friends.

When children were asked what they consider essential to guarantee an acceptable standard of living, they had modest expectations. Research conducted by the Children’s Research Centre of Trinity College Dublin for Barnardos and the Society of St Vincent de Paul, resulted in the creation of a 12 item child-specific deprivation index which included: having food and drink in the house for when their friends come to play; three balanced meals a day with fresh fruit & veg; and family days out at least twice a year. Almost one-in-three children said they had been deprived of at least one item on the list.

9-out-of-10 parents cut back on essentials to keep up debt repayments

Commonly parents have pared spending to the bone in order to keep up with Creditors’ demands: not only do they regularly sacrifice their own needs or wants for the sake of their children but research shows that 9-out-of-10 have actually had to cut back on essentials like food clothing or heating for their children in order to maintain repayments.

Getting professional help from a Personal Insolvency Practitioner (PIP) to find an appropriate formal debt solution can alleviate the chronic anxiety caused by unaffordable debt and make a positive difference to household finances as everyone is entitled to ‘Reasonable Living Expenses’ which take into account the size of your family and the ages of your children.

Irish families lost a decade of income progress in four years

Official data reveal the severity of the debt issues ordinary families are facing: the Unicef report ‘Children of the Recession’found that between 2008 and 2012 Irish families lost the equivalent of a decade of income progress and it ranked Ireland 37th out of 41 developed countries in terms of overall child poverty and 32nd out of 41 for food and material deprivation.

Also, the Irish Times recently cited census data showing that the proportion of children in Ireland living in consistent poverty has almost doubled, from 6% to 11.8%.

Child benefit is off limits to Creditors seeking repayments

As part of the process of applying to enter a formal debt solution you need to sit down with a specialist Money Adviser or PIP to look at your income and outgoings and how much you owe in order to calculate how much disposable income you have available to pay Creditors. There were instances where advisers at some firms ill-advisedly included Child Benefit in disposable income despite the fact that this money should be ringfenced for the benefit of children.

The Insolvency Service of Ireland stepped in to make it clear that Child Benefit (which was increased by €5 Euros to €135 per month for each child from January 2015) cannot be used as part of a debt repayment plan. Your PIP’s responsibility is to work out an affordable debt repayment proposal (with the emphasis on affordable) which also allows you and your family to have a reasonable standard of living, including being able to use your Child Benefit for your children rather than having to hand it over to Creditors.

Protecting your home from Creditors gives your children security

One of the most stressful things for families is the fear of having their home repossessed and worry over the upset it would cause their children in particular. The prospect of leaving familiar surroundings and possibly having to move school and play groups can upset children of all ages.

These are very real fears for the 30,000 families who currently have mortgage arrears of more than two years on their ‘principal private residence’ or PPR - which is simply the home they live in. There are formal debt solutions which have the potential to protect the family home such as the Personal Insolvency Arrangement (PIA).

If you enter a PIA, your PIP is empowered by the ISI to ensure as far as is “reasonably practical” that you are not obliged to sell or move out of your home. A key point is that you are afforded a greater opportunity to protect your home in a PIA than if you have no debt solution in place and mounting mortgage arrears.

For parents, sharing their worries about debt and the impact on their children’s lives and future outlook with a professional debt expert, is the first critical step to getting their family’s life and finances back on track.