According to government figures, the UK is now officially in recession for the first time since 1991.
Official government figures have confirmed that gross domestic product (GDP) fell by 1.5% in the final quarter of 2008 following a 0.6% drop in the previous three months.
Two consecutive quarters of falling economic growth is the generally accepted definition of a recession, which has now been met following the release of these latest figures.
Efforts to prevent the recession from deepening have been widespread, with debt advice organisations and charities offering help to people struggling under the effects.
Unemployment has been rising sharply, whilst the pound has fallen, and the housing market remains depressed.
As the effects of the recession take hold, increasing numbers of people will require debt help and will be turning to professional debt advice organisations to rescue their finances.
Following a free consultation, debt advice will usually be offered which may include recommending a debt help solution – like a debt management plan or IVA (individual voluntary arrangement).
Debt help solutions, like debt management and IVAs, enable people who are struggling maintaining payments to regain control of their finances whilst still repaying balances at a more affordable level.
Debt management is an informal debt help solution where unsecured balances (credit cards, store cards, overdrafts, loans and other credit debts) are gathered together into one single payment.
The person who initially offered the debt advice will usually work out how much can realistically be paid towards a debt management plan, once priority payments (mortgages, secured loans, utility bills, CCJs etc) have been accounted for.
On a debt management plan, the single affordable payment is then distributed to all creditors on the client’s behalf – taking away the hassle of dealing with creditors.
An IVA is similar to a debt management plan in that debts are gathered into one payment, but on an IVA a qualified insolvency practitioner will first give debt advice. Also with an IVA, the insolvency practitioner drafts a legally-binding contract between the debtor and their creditors, which protects from creditors changing their demands.
Once an IVA has been agreed the insolvency practitioner will administer the IVA throughout the full term (usually five years), after which time all unsecured balances are written off.
It is anticipated that 2009 will see the demand for debt management plans, IVAs and other debt help solutions increase, as the recession takes hold. Greater numbers will also be in need of impartial debt advice, to avoid bankruptcy and becoming insolvent.