The high cost of debt to your wellbeing

I *years to come the current recession could come to be seen as a turning point for helping people whose debt problems are linked to their poor state of mental health. Debt advisers are now seeing far more clients with this type of condition and, as a result, they are developing new ways of responding.

Next Thursday, for instance, a group which reports directly to the Cabinet Office and the Government's chief scientific officer meets to discuss various proposals including setting up better co-ordinated "debt care pathways" between health professionals and debt advisers. The so-called "Foresight Project on Mental Capital and Wellbeing" will also look at the idea of a "voluntary register for bipolar people to prevent them from overspending".

Other initiatives are also taking place, coming from government, psychiatrists, the debt advice world and even from lenders. They are responding to the fact that mental health seems to be a more widespread factor in debt than was previously thought. The "one in four" statistic – one in four people with debt problems also suffers from depression or another condition – is well-established. But the real figure could be much higher. As many as "half of all adults in debt may have a mental health problem", according to the Royal College of Psychiatrists, which published new evidence in October, along with charities Rethink and the Money Advice Trust.

The problem is that debt can also induce depression as a natural reaction. "It's chicken and egg," says Frances Walker of the Consumer Credit Counselling Service. "Which comes first – debt or depression?" And Fred (not his real name), a debtor-turned-debt adviser, says: "Debt, depression and divorce, the three Ds, go hand in hand."

Until four years ago, there was very little assistance for the depressed or other mental health sufferers in this field. The notion that they might have special problems was something that was rarely discussed. Since then the work of some 20 or 30 committed people has pushed the issue up the agenda. So, only a week ago, a new form was launched which enables health and social care professionals to assist those who are unable to control their financial matters. The "Debt and Mental Health Evidence Form" collects together details of social care and health advisers and some evidence of the problem, and can be used to inform lenders that they need to take special care in this person's case. "This will be incredibly important," says Maggie Kirkpatrick, adviser at the CCCS centre in Eastbourne.

The DMHEF has been in place for over a year but it was not particularly easy to use until last month and was not well-known among health professionals. Not only has it now been clarified but the Royal College of Psychiatrists is working to publicise it among its members and make it more effective. The DMHEF was produced by the Money Advice Liaison Group which drew up the mental health guidelines for financial institutions which are attached to the new Lending Code. Through this code which came into force on 1 November lenders are urged to deal sensitively with people suffering from mental health issues. MALG chairman, Anthony Sharp, believes many lenders are getting much better in their response. Many have set up "sensitive case departments" and, he says: "Creditors and debt collectors have become much more aware."

By next summer MALG hopes to embark on its next project. Since the Lending Code guidance focuses on responding to the issue when people are already in debt, MALG will try to look at whether something can be done to stop mental health sufferers clocking up debts in the first place. Mr Sharp believes there could be insurmountable legal and confidentiality issues, but he wants to explore the whole subject of lending decisions. "It must mean somebody somewhere saying to you: 'Do you have mental health problems?' Are we allowed to do that?"

These campaigns to help mental health sufferers are gaining support. For instance, Tony Blair's former adviser, Alastair Campbell, and Stephen Fry, the comedian, have both suffered mental health problems and support the work of the Money Advice Trust. Mr Fry says: "My own bipolar condition has caused me to go on many giddy spending sprees so I have first-hand experience of the difficulties of debt brought on by poor mental health. I fully support the new research in this area and the recommendations which have been made to both the health care and the financial services sectors. An understanding of the relationship between mental health and unmanageable debt should ensure that appropriate advice and support is provided to those who need it."

The recommendations that Mr Fry is supporting would require banks, lenders and debt collectors to have new standards of "best practice" in place, recognising mental health issues and setting up specific ways of responding to people with those conditions. A big step nearer to this goal is likely to come soon from the Office of Fair Trading which, it says, will "in the new year" publish a new set of "responsible lending" guidelines. It is expected to cover mental health in the guidance. "We don't know for sure but all the indications are that there will be something there," says Jim Fearnley, head of research and policy at the MAT. If this is the case, then organisations which ignored the guidelines could find themselves under investigation by the Office of Fair Trading.

A major difficulty in getting sensible solutions for mental health sufferers is that a unduly generous system would be exploited by scamsters and even ordinary people with irresponsible tendencies. Campaigners are aware of this. Speaking of the new DMHEF form, for instance, Mr Fearnley says: "We are not saying that this should be a Get Out of Jail Card." And Malcolm Hurlston, chairman of the CCCS and a leading campaigner in this field, thinks that debt will remain a fact of life for many people even if significant strides are made.

Nevertheless, Mr Hurlston hopes to make progress on these issues "in the first quarter of next year". He defines his aim for those with mental health problems in this way: "The key will be to get people not so deeply into debt and to get them out of it quicker."

Among the plans which will be discussed at Thursday's meeting is that of setting up a voluntary register which spendaholics or people with bipolar disorder could sign up to, if they wished, so that they could not overspend in a few manic hours on a credit card. Their cards could then be blocked if large debts were being made on them. All sorts of other ideas are also being discussed. CCCS, for instance, hopes to have a special service in operation for this sector of debtors in a year or so, a service in which the counsellors would have specialist knowledge of mental health problems. CCCS is also working on an online self-diagnostic tool which will help people spot their own mental health issues and tell them what sorts of treatment are available.

Help is at hand: Free debt advice

While those with enough money might prefer to employ the services of lawyers, accountants and other professionals to help them get out of financial difficulty, many people of limited means often require free debt advice. The organisations below can such help.

* Consumer Credit Counselling Service: www.cccs.co.uk and 0800 138 1111

* Citizens Advice: www.citizens advice.org.uk and via local advice centres

* National Debtline: www.nationaldebtline.co.uk 0808 808 4000

Debt woes: 'I felt suicidal. You lose all sense of proportion'

What to do if you are suffering depression or some other kind of mental illness:

1. Try to tackle your debts before they mount up. By confiding in someone else now rather than in a year you can save yourself money and years of worry.

"The idea that I was going to commit suicide over a debt of £5,600 seems incomprehensible now," says Fred (not his real name), a debtor-turned-debt adviser. "But you lose all sense of proportion."

2. Go to your doctor about the anxiety or mental illness aspect. People often attribute sleeplessness and agitation to worry, says Maggie Kirkpatrick of the Consumer Credit Counselling Service (CCCS).

3. Speak to someone else about your finances – a friend but, preferably, a debt adviser. They are used to dealing with these issues and will not be shocked. CCCS takes about 300,000 phone calls a year on debt problems. They can contact your debtors for you, listen to your story and help you get back on course.

4. Avoid doing nothing. You can find that bankruptcy proceedings are started against you if you simply do not reply to your creditors.