As insolvencies reach record levels, Ed Bowsher looks at some of the ways to deal with a personal debt crisis.
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Hi I'm Ed Bowsher from lovemoney.com and welcome to Make your money go further, and in today's show I'm going to talk about debt.
What is the current debt situation?
Insolvency figures for 2009 came out last week and they make very sorry reading.
134,000 people became formally insolvent last year. Sadly, this is a record number and I fear the 2010 numbers will be just as bad, perhaps even worse.
So if you're facing a debt disaster and you fear you may have to go bankrupt, what are your options?
What options are available to me?
Well, firstly, I want to stress that bankruptcy can be a good solution for some people. Yes, there are big downsides to bankruptcy, but the big plus is that a large chunk of your debt will be written off. Then - eventually - you can start afresh with no debt burden on your shoulders.
And now there's also a cheaper alternative to bankruptcy called a debt relief order or DRO. It's only available to people with relatively small debts but the cost savings are significant.
Is it possible to avoid bankruptcy?
Another option is an IVA or Individual Voluntary Arrangement. IVAs also enable you to write off some of your debt, and they don't quite carry the same stigma as bankruptcy. That's particularly useful if bankruptcy would prevent you from carrying on in your profession. On the downside, the charges can be high, and there have been many reports of misspelling.
These aren't the only solutions and I haven't got time to go through them all. The best thing to do is get some quality advice before you do anything.
Where can I get debt advice?
Funnily enough, when it comes to debt, the best advice tends to be free, so avoid debt advisers who want to charge you for their services. Instead, you can get great advice from charities such as the Consumer Credit Counselling Service (CCCS), National Debtline or Citizens Advice. These guys are definitely the best way to go.
You can get also get more information and advice on debt on our new dealing with debt blog. Check it out at lovemoney.com/blog.
This is a script of a lovemoney.com video. Instead of reading it, why not watch the video instead? You can find the video here.