Personal insolvencies are on the up: How to handle debt

personal debt

Both businesses and individuals are facing increasing financial strain. With a chance of increased interest rates in May, this is another contributing factor which will impact many people’s finances.

The personal debt crisis has been acknowledged, but there are a number of factors contributing to the financial woes of UK citizens.

Mental Health Awareness Week in May focused on stress and highlighted a connection with finances. A study by Metro revealed that 77% of people are stressed about money. In April this year, personal insolvencies were at their highest level in four years. This concerning statistic means more people are heading towards debt, inevitably leading to concerns not just financially, but also mentally.

As financial struggles are prominent both in homes and businesses, what can companies do to handle their debt management?

What Should Businesses Do If They’re in Debt?

While individuals are worried about debt, many businesses are as well. Small businesses face increasing pressure to succeed, as only 40% survive more than five years. While many new businesses have a strong passion and good intentions, the market is competitive. The increase in personal debt can affect the success of businesses as consumers curb their spending habits.

If a business or individual finds themselves in too much debt and needs a way out, the first step is to understand the options. There are different debt management solutions available and the government website outlines each of these. The important thing to understand is that bankruptcy is the last option.

Your creditors will want you to pay your money back, so most will be forthcoming with arranging a solution with you and whatever debt plan you choose. Whichever option helps them best receive their money is the one they will be on board with.

Finding the best debt management solution varies between each business and individual. Finding the right one relies on expert advice to guide you through the most suitable arrangement. If you’re confused about the difference between an individual voluntary arrangement and debt management plan, you’re not the only one. Consulting with an expert means you can understand the value of each.

With the right information, an insolvency practitioner or debt advisor will be able to offer advice based on your financial figures. The last thing you want to do is file for bankruptcy when there was a better solution to be found.

Finding the Best Debt Management Company

No matter how much you might want to delay it, consulting with an expert sooner rather than later is better. But, finding the right one for you is equally important.

In 2014, The Financial Conduct Authority (FCA) took over authorisation of debt management companies. Since then, many companies have left the market and the FCA has refused authorisation to a number of businesses. Always find a company that is FCA authorised — these can be found on the Financial Services Register website.

The best debt management companies use debt management software. This helps to facilitate the workflow and keeps all the critical information in one place. New credit reports created by Logican and Experian have been designed specifically for debt management companies and those working in the IVA industry. It allows debt companies to work efficiently to organise a debt plan which benefits the consumer. These credit reports are able to highlight all outstanding debt. This means if you’ve lost track of your debts, the report can help to obtain vital information.

Organising your debts is a stressful task, but if you use the right debt management solution, it’s possible to become debt-free.