Benefits Overpayment Causes Low-Income Families to Look to Debt Consolidation, say Baines & Ernst

MANCHESTER, England, March 26 /PRNewswire/ -- Low-income families are being forced to pay back 1.85bn pounds Sterling after the government made overpayments to 1.6 million people through the benefits system. It is believed that thousands of people, many of whom are already in debt, will have to seek financial assistance in the way of debt consolidation and even bankruptcy.

A Commons spending committee report states that 50,000 people owe between 5 and 10k pounds, 23,000 owe 10k-20k pounds and over 8 and a half thousand owe more than 20k pounds after the government made a catalogue of errors in the payments system.

Debt consolidation firm Baines & Ernst say it will cause huge problems for low-income families. A spokesperson for the firm said, "This level of debt will prove almost insurmountable for people who are already struggling. The most worrying aspect, particularly for those in the 20k+ pounds bracket, is the real possibility that the government will sell the debt off to the private sector, which could pose a threat to the safety of customers from debt collectors and bailiffs. It's imperative that safeguards are put in place to protect vulnerable families who, after all, are unwitting victims of government mistakes."

The committee found that the government has actually improved its identification of overpayments, suggesting that millions have gone unaccounted for in the past. In 2007-2008, 9.3 million pounds in small overpayments was written off as too small an amount to make a retrieval program worthwhile.

Most of the errors involved a failure to reduce claimants' benefit payments following an earnings increase. Hundreds of thousands of people experienced more than one error in their benefits payments. Detractors say it's a sign that the government's current benefits system simply isn't working.

The Baines & Ernst spokesperson continues: "The fact that so many people fell prey to multiple errors is indicative of the sheer scale of the problem. The government simply doesn't have a mechanism for assessing the level of repayment that people can afford, which leaves the process open to abuse. The best thing for those who have fallen foul of overpayments and find themselves struggling to pay back large sums of money is to seek debt help. For people with other debts as well, it may be prudent to opt for debt consolidation."

About Baines & Ernst

For over a decade, Baines & Ernst has been working to help people to live a life free from debt. With Debt Management Plans (DMPs) we have helped tens of thousands of people change their lives. The DMP is an informal arrangement between your client and their creditors, and we will use our unrivalled experience to negotiate the best deal for your clients. http://www.bainesandernst.co.uk/

SOURCE Baines & Ernst