Families, friends cut ties with those drowning in debt

People with money problems tend to stay away from friends and family

PUBLISHED : Monday, 24 June, 2013, 12:00am
UPDATED : Monday, 24 June, 2013, 5:33am

Half of all people who are heavily indebted or who have been declared bankrupt find themselves being isolated by family and friends, a survey has found.

People in financial difficulty also tend to distance themselves from others and are less involved in the community. They are consistently under pressure and have low self-esteem, the survey by the Caritas Family Crisis Support Centre concluded.

Social workers from the centre said such people are often stigmatised.

"Among those who seek help from us, we find many are on low incomes rather than being reckless gamblers or spenders," said Paulina Kwok Chi-ying, the centre's supervisor. "But they are excluded from opportunities."

The survey was conducted in March among 400 people who had sought help from the centre. Half of them were in debt and the other half were bankrupt. Most were middle aged.

Their main reason for getting into debt in the first place was simply to make ends meet, the survey found.

Half of those in debt and 80 per cent of bankrupt individuals were unable to borrow money through normal channels, and had turned to payday loan firms and other lenders, notorious for high interest rates and charges.

Kwok said respondents' lack of knowledge of compounding interest and the shady practices of such lenders often pushed them even deeper into debt.

Almost three-quarters of respondents said banks and finance companies did not provide enough information on how they calculate credit interest.

Many were not well educated, and did not understand their financial statements, said Kwok, adding that many did not even know how much debt they had started out with.

The survey found that 46 per cent of those in debt and 55 per cent of those declared bankrupt said friends and relatives avoided contact with them because of their debt problems.

"They may have asked friends and relatives to lend them money, which has affected their relationships," said Kwok.

About half said debt had affected their career prospects. Some were required to report their bankruptcy to their employers.

Many also excluded themselves from the community. Almost two-thirds said they avoided contacting friends and relatives due to their debt problems. Six in 10 said money woes had discouraged them from participating in the community and voting in elections.

Two in three interviewees saw themselves as failures.

Kwok said the survey demonstrated the need for more credit management education and consultation services to be made available for the poor and financially vulnerable.