Debt- Debt advice lines feel the pinch
The National Debtline which was set up by the Government to help people in financial trouble, is being overwhelmed by callers. A major Sunday paper has reported that 8 out of 10 of its test calls went unanswered even after holding on whilst the phone rang out for ten minutes. The Debtline recognises the problem reporting that January was its busiest month since its foundation 19 years ago and admits that it failed to answer two thirds of the calls made to its telephone numbers.
The Credit Counselling Service and the Citizens Advice Bureau have also reported record demand with hundreds more calls per day than this time last year. And in the last quarter of 2005, bankruptcies were up by 46% over the same period last year.
If this evidence is anything to go by, there are a lot of people out there realising that they’ve pushed the boat out too far when it come to taking on loans, credit cards and other forms of debt.
For those that simply can’t solve their financial crisis, there are two options. An Individual Voluntary Arrangement (known as IVA’s) and Bankruptcy.
IVA’s are a more lenient form of insolvency whereby you pay back a percentage of what you owe, typically 30 – 50%, over five years. But don’t think that an IVA is an easy way out – it’s a legal agreement between you and your creditors and is administered by a specialist insolvency company. If you don’t keep to the agreement you can be forced into full bankruptcy at any time. But at least after five years it’s all behind you and whilst your credit rating will b battered it won’t be out for the count.
The more extreme option is bankruptcy. Under the 2002 Enterprise Act, bankrupts debts can be discharged after just one year as opposed to the three years it took previously. For this reason, more and more people are biting on the one-year bullet. Everything you own other than the essentials for living, become the property of your receiver to be sold to pay off as best as they can, your creditors. Special arrangements are put in place for your home if this is jointly owned.
Then at the end of the year you are free to go your way to rebuild your financial life. Credit will be impossible to obtain for 12-18 months but after that doors start to open and life gradually get back to normal – just learn from the experience and make sure you don’t repeat you mistakes.
