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Childcare Costs Leave Some Parents Facing a Trust Deed

26th September 2011

A recent survey commissioned by the Daycare Trust and Save the Children has shown how some working families in Scotland are getting into debt and taking up a trust deed as they struggle with the high cost of childcare. Childcare fees have never been so high, with many parents in the UK now paying almost one third of their salary on childcare (higher than anywhere in the world). In extreme cases the debt that results from childcare costs can result in the need for a protected trust deed, Debt Arrangement Scheme, or even sequestration.

Some parents are lucky enough to have help from grandparents or friends who can help with childcare. Other parents have taken matters into their own hands by one parent reducing their working hours in an attempt to reduce their childcare bill. However, many families will have no option but to pay for their childcare on a full-time basis so they can go to work. When things are tight it can be easy to decide to pop a month or two of such costs onto a credit card. On an exceptional basis this might be fine, but where it feeds into a picture of escalating debt it could lead to serious debts that can only be dealt with by measures like a trust deed in the end.

Of the 4,359 parents surveyed 58% said they had cut essential expenditure such as food, clothing and household bills just to be able to pay for childcare and 4 out of 10 families said their childcare costs totalled a similar amount of money to their rent or mortgage. Families who are already struggling with the rising cost of living often turn to credit in an attempt to pay their childcare fees. Financing essential expenditure with credit over an extended period is a common precursor to the future use of a trust deed to deal with debts.

A quarter of parents surveyed said they were already in debt (perhaps even already subject to a trust deed in serious cases) because of their childcare fees, a result that is causing alarm amongst childcare professionals. The Daycare Trust’s policy and research director recently said “It is unacceptable that parents are being forced into debt in order to pay for childcare.”

The greatest impact is likely to be felt by the poorest families who are already trying to meet the rising costs of petrol and utility bills and have just been hit with the reduction in the childcare element to working tax credits, adding an average of £500 per year to their childcare costs. A quarter of these low income families said they had given up work and a third had turned down work because of childcare costs. 61% of families of low incomes said they struggled with childcare fees compared to 37% on higher incomes. This frequently results in unmanageable debt which can only be managed effectively through a debt solution like a trust deed.

Parents in Scotland now face an average childcare bill of £5,178 per year. Some parents may find that the additional cost of childcare together with their existing living costs they may be unable to meet all of their debt repayments. If this happens the first step to take is to seek advice from a professionally qualified debt or trust deed adviser. That doesn’t mean that you’ll need to start a debt management plan or a trust deed, it simply means that a professional can review your situation and make suggestions to you. Often trust deed advisers are able to show people how to reorganise their finances to avoid such measures at all.

Like other formal debt solutions, a trust deed is a last resort. However, for the right person in the right circumstances getting a trust deed might be an appropriate course of action in comparison to allowing debts to escalate where childcare costs are leading to huge financial pressures.

To find out more about how to deal with unmanageable debts by using a trust deed visit www.Trust-Deed.co.uk . We have a team of professionally qualified trust deed experts on board and can offer you advice and assistance both on the website and over the phone on 0800 043 7201.

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Wylie & Bisset Grant Thornton

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