Is Personal Debt out of Control?

How to Escape Financial Problems and Become Debt Free

Dec 15, 2008 Asa Ghaffar

Personal debt and credit issues affect millions of people. Resolving financial problems through various debt solutions is an effective method of overcoming money trouble.

It is understandable why money troubles have worsened. Consumers have become increasingly reliant on credit cards to cover the rising cost of living. Increased fuel costs, higher utility bills and more expensive foods have led to financial problems.

Why Consumers Struggle with Personal Debt and Money Issues

No budgeting or financial planning. A breakdown of income and expenditure helps those in money trouble calculate how much is left for social spending.
Not prepared to save and over-using credit cards. According to MoneyExpert.com in a recent Daily Telegraph article "An extra 250,000 people aged between 25 and 34 are still trying to clear their credit card debt from last Christmas, compared to the number who were a year earlier."
Waiting too long to get financial assistance with money issues. John Fairhurst, Managing Director of Payplan, stated that: "Our research shows that British debtors are waiting far too long before seeking professional help."

Where to Get Free Financial Assistance

It is possible to get financial help from a number of sources in both the public and private sector. Private companies offer advice because they are trying to sell a solution. There are also a number of charities providing free debt advice for those in money trouble.

Debt Solutions to Money issues

Debt Management Plans. A single, affordable monthly payment is made to an intermediary and this is sent to creditors on a pro rata basis. A Debt Management Plan can result in interest and charges being frozen.
Individual Voluntary Arrangements. An IVA is a legally binding arrangement where any outstanding money is written-off once 60 monthly payments have been made.
Consolidation Loans. This provides an opportunity to consolidate all sources of high APR finance under one roof and reduce monthly payments.
Personal bankruptcy. Allows a debtor to fully write-off almost all liabilities. It isn't a suitable solution for those that own their own property. The announcement is made public and it does mean that certain forms of employment are no longer possible. Most bankrupts are discharged after just 12 months, although some will face a Bankruptcy Restriction Order (BRO) for certain bankruptcy offences.
Full and final settlements. This involves making a lump sum payment to a creditor in return for the remainder being written-off. Make sure that this is agreed to in writing before making any payment.

Financial problems can be overcome through a combination of careful budgeting, financial assistance and choosing the right debt solution. Most people face money issues at some point in their life, but it is possible to become debt free.

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