Experts predict that unemployment could rise to almost 4m which would cause further debt management issues and have devastating effects on the debt problems of those affected.
The Centre for Economics and Business Research (CEBR) think-tank suggests that the unemployment rate could rise to around 3.8 million, from the current level of 2.4 million, with national debt soaring to £2 trillion.
Research by the CEBR suggests that due to the global economic slowdown and the Government’s handling of the economy, the debt problems of many more people in the UK could be made significantly worse.
Debt advice organisations have warned consumers to protect themselves from debt problems getting out of hand.
Ivan Cooper, Chairman at debt management specialists Chiltern, said: “The predictions made by the CEBR could mean that debt management issues for many people may get considerably worse, especially if unemployment nears four million.
“If people are struggling with their debt problems at the minute, it’s best to seek impartial debt advice before they get any worse – especially with the threat of redundancy or reduced wages in the current climate.
“In many cases simple debt help can relieve many issues, and help people to regain control of their finances – although in some circumstances a professional debt help solution may be needed.”
As disposable incomes are reduced, caused by the recession and growing unemployment levels, they will inevitably find that unsecured balances (overdrafts, personal loans, credit card debts etc) become increasingly difficult to repay.
Reputable debt help organisations, such as The Debt People, Hamilton Locke and Chiltern, offer free debt advice to people struggling with their unsecured balances.
They may also be able to offer a number of professional debt help solutions for people whose debts cannot be relieved with simple budgeting and debt advice.
Professional debt help solutions include Debt Management Plans (DMPs), Individual Voluntary Arrangements (IVAs) and Trust Deeds amongst others.
A Debt Management Plan is a flexible and informal way of repaying all of the people that you owe money to, but with one single monthly payment.
On a Debt Management Plan payments towards creditors are negotiated to a more affordable level, as the monthly amount is based on what you can realistically afford to repay once priority payments have been accounted for.
Priority payments include rent/mortgage, utility bills, food, council tax, travel to work and other essential items.
The amount remaining from your income, once these have been taken away, is your disposable income. This is paid to the debt help provider, who then distributes this on a pro rata basis between your creditors on your behalf.
Often on a Debt Managment plan, interest and charges can be reduced or stopped – lowering the amount you would have had to repay.
An Individual Voluntary Arrangement (IVA) works in a similar way, in that multiple unsecured balances are gathered into a single affordable payment. This is repaid over a fixed period of time though – normally within five years.
An IVA also requires a qualified Insolvency Practitioner to provide IVA advice and support, and draft a legally binding agreement between you and your creditors. This protects you from your creditors changing their payment demands.
On an IVA, all additional interest and charges are stopped, and correspondence is done via your insolvency practitioner – so all demand and letters from creditors should stop.
Once the IVA term is complete all remaining unsecured balances are written off – providing you have maintained the monthly payments.
For immediate debt advice, or for more information on other debt help solutions, please call the number at the top of this page.