Older generation of borrowers faces up to the big squeeze

With children and parents to support, elderly people are more in debt than ever before, writes Helen Monks

Think of the people most likely to find themselves in serious debt and you are likely to call to mind either young urbanites living the high life on credit or families with children struggling to keep up loan repayments.

However, there is growing evidence to suggest that serious debt is affecting retired and elderly people more than ever.

GPs are reporting that more elderly patients are coming to their surgeries with non-medical problems such as debt. And a recent study, published jointly by debt advice charity the Consumer Credit Counselling Service (CCCS) and Age Concern, shows that baby-boomers are running up more debts in their 50s than previous generations.

The study of 21,000 showed that those in their 50s not only owe more than younger people (at just under £20,000 non-mortgage debt, compared with about £14,700 for those under 50), but also that they owe more relative to their income: on average more than 20 times their net monthly income.

Frances Walker of the CCCS says: 'Older borrowers are being squeezed at both ends - by children who are financially dependent well into adulthood and by their parents who are living longer and needing care.'

The result is that when many retired people would have expected to have been enjoying the fruits of their labours with their pension savings, instead they fall into serious debt.

Gordon Lishman, director-general of Age Concern, says: 'Older people have historically been reluctant to get into debt, but our research shows some of the next generation of pensioners appears to have different attitudes.'

While they may be more willing to get credit, there is evidence to suggest that those facing major debt in their later years might be among those most reluctant to accept the most appropriate course of action when borrowings run out of control.

Experts believe a sense of shame might be to blame for the fact many older debtors are reluctant to do the right thing. The most favourable options might include either an individual voluntary arrangement or bankruptcy.

IVAs enable borrowers to make payment proposals to creditors through an insolvency practitioner. Under an IVA, it may be possible to retain assets such as the family home and, unlike bankruptcy, an IVA is not reported in local legal notices.

Bankruptcy might be appropriate where your debts are overwhelming and there is little prospect that you will ever clear them or make an offer to settle them.

With bankruptcy, any significant assets, such as equity in your home, are likely to be used to help settle your debts. It also places some restrictions on your ability to obtain future credit, carry on business and hold certain public offices.

If you are older, do not have major assets and are unlikely to need credit for the rest of your life, then bankruptcy could well be the most appropriate solution.

But, says Walker: 'We find people in their late 70s, with no assets and minute incomes, still struggling to pay off as much as they can because they are worried about the stigma of bankruptcy, or because they feel it is dishonourable.'

So what should you do if you or a loved one are facing debt in your old age?

Age Concern suggests some basic rules, including not ignoring the problem and concentrating on paying off your priority debts first. Priority bills are those most likely to bring the most serious consequences if you do not pay them off and typically include mortgages, second mortgages or secured loans, rent, council tax, water, gas and electricity.

Remember, it may be possible to negotiate with creditors; the sooner you speak to them, the more likely they are to be flexible.

Charities including Age Concern offer free guidance tools and several organisations offer free advice, including charities and your local Citizens Advice Bureau.

Remember, whatever your age, if your debts are getting beyond your control, it is always better to act sooner rather than later.

Consumer Credit Counselling Service: www.cccs.co.uk, 0800 138 1111; Age Concern: www.ageconcern.co.uk, 0800 009966; National Debtline: www.nationaldebtline.co.uk, 0808 808 4000; Citizens Advice Bureau: www.citizensadvice.org.uk