The dark side of debt: Descending into financial desperation is not due to self-indulgence

From being a victim of sexual assault, to losing a family member, to disease wiping out a business ... financial trouble can invite itself into our lives – and stay.

Simon Read trawled through the files of debt manager Payplan to uncover three people who reached a desperate stage in their lives because of their debt problems. Their stories reveal financial desperation that was born of other, serious concerns. Those concerns left them vulnerable. And the vulnerable are most at risk of falling into a debt spiral...

'I was raped by my friend's husband'

Harry Smith was 27, had a good job that involved lots of interesting overseas travel, and was looking forward to dinner with friends and family one Friday night.

But what happened to him that night – events he's still trying to piece together nine years later – left him struggling to cope with his life, and heading for a breakdown and a fast road to financial ruin.

"My friend had recently married and invited us [Harry and his family] round for dinner. Her husband was a charming man who had proposed to her after their third date.

"But no one really knew him," Harry says. "I fell asleep at the table and everyone presumed I was drunk. He suggested I should stay the night, so my family left me behind.

"The rest of the night was a blur, with me coming in and out of wakefulness, but I believe he spiked my drink. I awoke on the floor in the middle of the night to the realisation he was sexually abusing me.

"All I can then remember is blacking out and waking up in different parts of the room with him abusing me."

The next morning, his mother returned to pick him up and said she found him partially clothed on the sofa. "She asked me what was wrong but I couldn't speak," Harry says.

Over the next couple of days he was consumed by confusion, guilt and anger. "I knew that something bad had happened but the next day was like being in a dream.

"On the Monday I had to go back to London for work but I just couldn't get out of bed. I was in a total state of shock and that was the start of my breakdown. After that, engaging with life became very difficult."

Soon after this, his employer offered staff redundancy, which Harry snapped up. "I made some really bad decisions while I was in a really bad state of mind. I ended up with a little bit of money but no job."

He set up as a consultant working with small charities, helping them with organisational development. But despite the reduced income, he continued his normal lifestyle with holidays and fun.

"Fundamentally I was a big old ball of mess and was spending freely and being handed more and more credit," Harry says. "It was like self-medication. I needed to keep busy, I couldn't sit still."

However, as his problems mounted, he ended up owing £17,500. He turned to therapy for help.

"There the rape emerged as a major source of pain. I had been blocking it out for a long time, but it was a major driver for all my bad decisions."

He went to the charity Survivors Manchester and got support in reporting to the police what happened that night.

He also joined the union Unite, which put him in touch with Payplan to help with his debt problems.

"They were not judgemental, and talked through my options step by step. It put this buffer between me and my creditors so I was no longer facing three threatening phone calls a day. That gave me some breathing space to get better and focus on my recovery and my ability to earn.

"My case against my attacker, who turned out to be a serial predator, went to the Crown Prosecution Service and they seem hopeful of a conviction. I want him stopped from damaging other people's lives.

"It leaves me to focus on getting out of debt, which is one of my biggest priorities."

'Foot and mouth disease killed my business'

Jane Clack was an experienced English teacher to foreign pupils who used to run courses for the French ministry and other foreign organisations.

When the school she worked for pulled out of running the courses, she decided to go into business for herself and take over the contracts.

She borrowed to set up her business in the knowledge that she had bookings right through the summer. But then came disaster. When foot and mouth disease hit the UK, French parents decided they didn't want to risk sending their children abroad.

"French parents are terribly protective and get very frightened, and they ending up pulling every single course I had set up," Jane recalls. "I suddenly had no money coming in and was over-extended in my borrowing. Not to put too fine a point on it, I was stuffed."

Unable to pay her debts and bills, she was nevertheless hopeful. "I thought I'd do a little bit of work here and there. I was bit like Mr Micawber: I thought that something would turn up."

Something did. Intensive residential language courses that summer saw her earn £12,000 in three months, which she hoped would be a kickstart for financial recovery. But when the cash hit her account, her bank simply exercised what was known as a right to offset, which meant it took all the money in her current to put towards debts in other accounts.

That left her with nothing to live on – and with no immediate prospects and debts of around £38,000, life looked bleak. When her husband died of cancer, she became even more vulnerable.

When she approached Payplan, it helped her with letters to her creditors and keeping communications open.

"People in debt feel very much alone – and stupid. When you're self-employed it's a double whammy, as not only are you in debt but you're also a failure because of the collapse of your business."

But she carried on paying what she could afford to her creditors and today, some years later, has rebuilt her finances and her credit status. And now she works for the company that helped her.

"I know what it's like to dread the post arriving, so I enjoy working with clients, although I also train others now," she says.

'My dad suddenly died while I was pregnant'

Jeanette Bamber was carrying her first child nine years ago when her father, aged just 54, died. "I didn't really have a chance to deal with the grief."

Her son, Sam, was born a few months later but the birth was traumatic as she had to go through an emergency caesarian. "I wasn't really with it during the process and didn't really get a chance to enjoy my new-born baby."

Then, thrown into motherhood, she struggled to cope. "No one really prepares you for what happens to you when having a baby. He was really hungry all the time and I fell into post-natal depression.

"That, mixed with the grief from my dad's death, left me fairly listless. I didn't want to go out and I couldn't be bothered cooking a meal as I didn't have the energy.

"We we having expensive takeaways instead and racking up the bills. This lasted for months after Sam's birth."

Jeanette was in charge of the family's finances but her depression left her unable to sort out the bills, so they started mounting up.

"One month I spent all the bill money and I simply had no idea where it had all gone. I ended up hiding the letters from my husband, and when I had no money left and had exhausted the overdraft, I went to The Money Shop [the high-street payday lender].

"I started with just £100 and it was so easy, I borrowed more. In the end I borrowed £600 but ended up paying thousands to them in interest.

"It was a vicious circle.When I had exhausted payday lenders, I went to [the doorstep lender] Provident. They kept ringing up offering more money. They said the repayments wouldn't cost any more, but of course they didn't mention the extra interest I was charged."

Pretty soon her debts topped £17,000. When she turned to Payplan, it helped her negotiate with her creditors and start an individual voluntary arrangement, just short of bankruptcy. Now she repays her debts at £400 a month. "Before I started the IVA, I had the bailiffs knocking on the door because of the council tax I owed. I dared not answer the phone or the door and kept the curtains closed. I still don't like answering the door."