The fact that total personal debt in the U.K. stood at £1,458 billion at the end of October bears testament to the fact cheap, easy credit has been – or at least had been, in the days before the credit crunch – available for many years. The credit crunch, followed by the recession, which the U.K. has officially been in since January, 2009, has changed the attitude to debt, insofar as consumers are choosing to pay off their existing debts, rather than save at paltry interest rates. Nevertheless, rising unemployment has meant that, for many people, debt problems have become a reality. One of the problems with debt is that it can induce feelings of hopelessness, or depression, or alternatively blind panic, none of which are conducive to a calm, considered approach to solving the problem of debt itself. "A problem shared is a problem halved", is as true of debt as it is of any other problem, if not more so and thankfully there are many charitable and commercial organisations, operating locally, regionally or nationally, that can provide you with debt advice. This could be at any level, from budgeting, to preparing a repayment plan for your creditors, to preparing for bankruptcy, but in any case, a debt counsellor will be able to offer you experience and resources specific to your own personal requirements.
Debt Advice
The trick to tackling debt effectively is recognising that a debt problem exists in the first place and then taking action to resolve the problem as soon as possible. For many people suffering from debt problems during the recession, that action has been contacting one of the debt organisations, such as the Citizens' Advice Bureau, the Consumer Credit Counselling Service (CCCS) or National Debtline, that offers confidential, impartial advice, support and counselling – which is nevertheless, free of charge – to anyone with debt or money worries.
If you are considering seeking advice from one of these organisations however, it is worth remembering that they are not commercial organisations and as such, may not be able to respond to your request within hours or days, particularly in light of the recession and the fact that Christmas is approaching. The Citizens' Advice Bureau for example, has seen the number of people seeking debt advice increase by over 20% in the last year and has handled just over 3 million inquiries relating to debt since the start of the recession. It is a similar story for National Debtline, which is based in Birmingham; National Debtline receives 1,600 calls a day on its freephone number and has seen a 15% increase in the number of calls relating to mortgage areas in the last six months and a 100% increase in the number of homeowners starting a DMP ("Debt Management Plan") or IVA ("Individual Voluntary Agreement").
This means that it is all the more important to seek advice as quickly as possible, particularly if you have tried to ignore the problem for a while and, perhaps, used expensive forms of credit, such as credit or store cards to make ends meet. In the meantime, all of the charitable debt organisations are urging consumers to budget and spend carefully over Christmas – traditionally an expensive period for everyone, but particularly arduous for those already struggling with debt – to avoid a debt hangover in the New Year.
Another possible solution to debt problems of course, is to approach a commercial debt management company. There are over 150 such companies in the U.K. offering debt management services to over 300,000 people for a fee, according to the Money Advice Trust, but consumers should tread warily, because, despite a significant increase in the number of debt management companies in the last decade, the sector remains largely unregulated. There is an industry body, known as DEMSA ("Debt Managers Standards Association"), membership of which requires commitment to a code of conduct approved by the OFT ("Office of Fair Trading"), but the problem with this is that membership is voluntary and very few companies are members. The Government has already announced a consultation regarding regulation, the results of which should be known by the end of the year, but in the meantime, it is down to individual consumers to decide whether paying for debt management service is worthwhile. Commercial debt management companies often take all of your first repayment to cover administration costs and 15% of subsequent repayments as their fee. This obviously means that it will take longer to pay off your debt than if you dealt with your creditors directly, or via one of the charitable organisations.