However it may be accrued, debt is something that no-one likes to deal with. Paying back more than the amount loaned out is inevitable but if something unfortunate were to happen to income i.e. job loss, then the impact that debt can have on someone’s life becomes far more serious. In such a scenario, it can be hard to know what’s coming next.
For those who have debt problems, their one saving grace could be the money they earn from working. Although things might be tight for them, at the very least, they have enough to pay back whatever debts they have in instalments. If the safety net of paid employment is taken away, then paying back whatever they owe becomes far more complicated, leaving them feeling helpless.
From bad to worse
Without anything but the meagre amount of money paid in the form of state benefits, it can be hard to keep up debt repayment. Depending on what needs to be paid for in full, resolving debt problems without doing something drastic can be hard. For unemployed homeowners, they face the very serious risk of having to lose their home in order to pay off their outstanding debts.
In the UK, anyone with bankruptcy debts who have their own property and don’t have anything else equivalent to what they owe, they have to hand over the deed to their creditors. This is especially harsh for anyone to take, losing the roof over their head, but in a way, homeownership can at least help to reduce the period of bankruptcy.
Bankruptcy is seen as a last resort for anyone who has no other way of paying off their debts. As far as bankruptcy’s concerned, homeowners and non-homeowners face different problems, the main one for the former being their ability to keep up with mortgage payments. This can become a massive problem if a homeowner loses their job and therefore their main source of income.
In the US, there is assistance for mortgage holders who have lost their jobs, but that’s not the case in many other nations. What helps to protect homeowners from the risk of falling into the bankruptcy trap is the likelihood of them earning more money than non-homeowners, but of course, that only applies if they’re actually in employment in the first place.
If asked to say which people were most likely to experience problems with debt and bankruptcy, the definitive answer would be non-homeowners. 77% of people who file for bankruptcy are non-homeowners, which may suggest that homeownership isn’t quite as big a financial millstone as it might seem for those in work.
Non-homeowners are likely to experience more financial difficulty for reasons such as having lower income, being more vulnerable when having the means to pay for emergency costs such as car breakdowns and fixing broken appliances and trying to cope with the cost of rent. These problems, although not quite as expensive as paying for a mortgage, can add up over time.