Debt trap due to illness

Overindebtedness Report 2011: Illness as the cause of over-indebtedness

25/09/2011

Health impairments entail a significantly increased risk of over-indebtedness. As „World Online“ citing the previously unpublished „Overindebtedness report 2011“ of the Hamburg Institute for Financial Services (IFF) reports, mental and physical illnesses in more than ten percent of over-indebted households in Germany cause the financial problems.

Thus, since 2005, the share of diseases due to over-indebtedness has doubled. While other factors such as unemployment, divorces or failed attempts at self-employment also play a significant role in the financial difficulties of more than three million over-indebted households in Germany, mental and physical complaints have been the most significant cause of over-indebtedness over the last five years.

Three million over-indebted households in Germany
According to the definition of the IFF, households are considered to be over-indebted who can no longer meet their financial obligations without jeopardizing their own basic services. As clear indications of over-indebtedness, delays in payment as well as credit and account cancellations are to be assessed. According to the experts, around 3.15 million households are currently over-indebted. As „World Online“ reports, the annual IFF study on the causes of over-indebtedness is based on the analysis of data from about 13,000 people who seek help from a debt counseling service each year. As a positive development, the IFF notes that there has generally been a slight decrease in commitments per household seeking advice from € 31,996 in 2009 to € 27,132 in 2011. „World Online“ According to the report, debt in the first quarter of 2011 even fell to 23,244 euros. The liabilities of the debtors seeking advice from the banks fell from 14,598 euros in 2009 to 11,364 euros in the first quarter of 2011. The remaining debts are generally divided between creditors of public-law institutions and the private sector, such as telecommunications companies.

Doubling of the disease-related over-indebtedness
According to the IFF study, unemployment remains at the top of the list with 31.2 percent. For 12.5 percent of over-indebted households, divorce or separation is the cause of financial difficulties and failed business start-ups at 12.1 percent. Mental and physical illnesses are the cause of over-indebtedness in 10.5% of those seeking advice, an increase of 5.5% compared to 2005. The figures make it clear that health complaints are becoming more and more important when serious financial difficulties arise, the study authors of the IFF explained. In particular, people between the ages of 40 and 50 are threatened by disease-related over-indebtedness, according to the current study. For younger borrowers, on the other hand, lavish consumption is often the cause of financial problems. 16 percent of the over-indebted 20- to 30-year-olds slipped into debt due to their irresponsible consumption behavior, while the proportion of 25- to 30-year-olds was 19.4 percent, reports the newspaper. In terms of the share of debtors of all age groups, consumer behavior is only of secondary importance at only 8.2 percent. As the online portal quoted from the IFF study has „the feature in debt counseling is far from the relevance it receives in the public debate.“

Aftermath of the economic crisis
The results of the „Overindebtedness reports 2011“ according to the experts are also characterized by the aftermath of the economic crisis. For example, with a time delay of one and a half years, the number of consumer bankruptcies in Germany reached 106,300 in 2010, the highest level since 1999. However, the decline in bankruptcy openings in the first quarter of 2011 indicates a trend reversal, according to the IFF. For the debtors already affected, the way out of over-indebtedness without help from the outside is often hardly possible. For example, 70 percent of those seeking advice over the age of 35 have bank debts, with about 10 percent of respondents receiving at least four loans „World Online“. Until the age of 45, the number of credits per capita tends to increase steadily and then remain high, which, according to the IFF experts, can be seen as a sign that those affected are often unsuccessfully trying to get away with new loans to free their financial difficulties. For the young debtors who borrow, for example, for studies, for the home furnishings or real estate, the situation is usually less dramatic.

Single parents particularly often affected
The IFF study also illustrates which groups of the population are particularly often affected by over-indebtedness. According to that, especially single people are affected and especially men. For example, the proportion of single men among those seeking advice on debt counseling increased from 34.1 percent to 37.5 percent between 2009 and 2010. Single women, on the other hand, are a little less affected by over-indebtedness than they were in 2009. According to Die Welt, their share of those seeking advice has fallen from 18.6 percent to 16.6 percent. The proportion of over-indebted couples has also fallen slightly in the past year, according to the IFF study. Single parents continue to be particularly vulnerable to over-indebtedness, with around one in five (20.1%) of single parents experiencing financial problems.

The fact that mental and physical illnesses are increasingly becoming a debt trap contradicts actually the principle of a solidary health care system, that the disadvantages caused by illnesses should at least be compensated to the extent that those affected do not get into financial distress. A doubling of the disease-related over-indebtedness is to be seen here as an alarm signal, which clarifies the need for action on the part of the policy. Appropriate measures must be developed to avoid permanent slippage of those affected. The debt counseling alone is certainly not enough here to help all over-indebted households. (Fp)

Also read:
Every 11th European is suffering from chronic pain
Hartz IV: Debt through health insurance

Image: Anja Wichmann / edited: Gerd Altmann, pixelio.de