Citizens Advice have called for a new form of insolvency to be made available to people on low incomes, after new figures show many of their clients are facing the prospect of a lifetime of servicing unpayable debt.

The average debt of people coming to the charity for help now stands at over £13,000 which represents more than 17 times their average monthly income. The charity calculates that even if their clients could repay the debt, it would take over 75 years to do so if repayments were made at an affordable level.

The problem is most acute amongst those with a low income, where poor information and decisions on financial affairs have led to unsupportable debt levels that have little prospect of being cleared.

While the country as a whole has seen a dramatic rise in personal insolvencies, even this option may not be open to people on low income because of the high costs involved - it now costs up to £475 to declare bankruptcy, a figure out of the reach of people already struggling to get by.

With this in mind, Citizens Advice have called for the government to speed up the introduction of Debt Relief Orders, a new kind of bankruptcy aimed at those with next to no assets or disposable income, but debts of up to £15,000. Under the program, most debt would be written off after a year, when the order would be discharged.

It’s expected that these orders will be much cheaper to implement than bankruptcy, and the process could be handled by charitable intermediaries such as Citizens Advice themselves.

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