Monthly Archives May 2011

Economic Recovery Painful for All

Article provided by Debt Support Trust – A registered charity.

The economic recovery in the UK is slow and painful. People and businesses have been feeling the strain for almost three years now and it doesn’t show any sign of easing up.  As inflation between March and April continue to rise, the increased cost of living in the UK will mean that more people will be closer to the breadline than ever before.

The recent rise in inflation based on the Consumer Price Index (CPI) from 4% to 4.5% was a result of the increased cost of transport, alcohol, tobacco and the increase in VAT. According to the CPI, the increase was offset by the price of clothing and footwear, which reduced by 1.3%.

The Ernest and Young Item Club has found that consumer spending could slow growth for the next ten years whilst people try and repay the debt they already have.  In 2010/2011, there were 148,916 insolvency solutions within the UK. At present, a property is being repossessed every 17 minutes along with the average household owing £8,144 excluding mortgages. 

For the UK economy to move forward and become stable, consumer confidence must improve and debt problems need to be dealt with.  People are deciding to save their hard earned cash and pay off debt which will hinder the economic recovery for businesses. Statistics from Credit Action explain

– people are paying £180m in interest daily
– 8,004 people are visiting the Citizens Advice Bureau each working day for help with debt
– 1,392 people are being made redundant each day with 847,000 people being unemployed for over 12 months.

Getting the right debt help

There are a number of debt solutions available for people struggling with debt. These debt solutions include;

Debt Management Plan: This is an informal debt solution which allows a person in debt to repay all of their debt over a longer than agreed period of time. The creditor and debtor can cancel the agreement at any time.

Protected Trust Deed: This is a Scottish debt solution. The person in debt would make a monthly payment towards their debt usually for 3 years. If all requests are met then the person in debt can repay a percentage of the money they own, with the rest being cleared. A person must be able to repay at least 10% of the money they borrowed.

Individual Voluntary Arrangement (IVA):  This debt solution is applicable for people living in England, Wales and Northern Ireland.  People owing £15,000 or more in unsecured debt and able to pay £200 a month towards their debt each month may be suitable for an IVA. The IVA usually lasts for 5 years and enables the person in debt to repay as much money as they can over this period, with the remaining debt being cleared (a minimum of 25% of the debt must be repaid).

Bankruptcy: Another debt solution is bankruptcy.  Bankruptcy is suitable for people who cannot repay any of their debt, or someone unable to repay enough to meet any other debt solution. If a person has an asset, such as a house, they will be required to release the equity.  

The recovery process

Rising living costs are likely to delay the economic recovery process as consumer confidence continues to remain low. However, as people return to spending money on holidays, new cars and other luxury items we will see an increase in employment and businesses returning to making profit.

People with serious debt problems can begin to rectify their financial situation by receiving debt help from a debt advice charity. The sooner a person receives help the quicker their finances can start the road to recovery and less likely they will be to face bankruptcy.

Holistic debt advice can be provided by Citizens Advice Bureau for face to face debt advice or by Debt Support Trust for telephone debt help.