Managing your debt and avoiding the debt collectors

Over the next few months there is no doubt that more and more people will see their credit card debt, general debt and general financial position weaken dramatically. This comes against a backdrop of a very difficult UK economy which is struggling to pull away from a secondary recession and the problems this will bring. Cuts in the public sector are already beginning to bite and more are more people are struggling to survive with unemployment increasing and expected to rise for some time to come.

Managing your debts

One of the main issues which has risen to the surface is the fact that more and more people are putting off addressing their debt issues until “tomorrow”. Historically, in relatively short recessions, many people have been bailed out by the fact that the economy will improve in due course and everything would return to “normal”. However, managing your debts in the current economic environment is very different because this is a situation which very few people have ever experienced before.

You need to address your debt problems as soon as possible, you need to contact your creditors and you need to come to some kind of arrangement with regards to future payments. It is a relatively unknown fact but if you offer to pay a minimum payment, or indeed a nominal payment, and your creditor agrees then they cannot take further action against you in the short term. This should hopefully give you breathing space to allow you to reorganise your assets, reorganise your costs and put yourself on a sound footing.

Would a trust deed protect you in the short term?

Those who have experienced debt in Scotland will be well aware of the trust deed option which effectively allows you to gain some form of protection from your creditors. In simple terms the court would appoint a trustee to your trust deed and they will effectively take control of your assets, your income and your spending. They would put together some form of plan which would see you pay back a portion of your debt, assuming you were able to pay back anything, and after the trust deed is over you would then exit this arrangement with no financial liabilities.

However, if you’re looking towards this type of protection in the short to medium term you do need to take professional financial advice as soon as possible. Sitting back in the hope that somebody or something will bail you out is a recipe for disaster and could see your situation become worse and potentially unrecoverable. There are many rumours regarding trust deeds but the fact is that they are in place to protect those who are unable to finance their debts but who may well be able to get themselves on a firmer financial footing in the future.

Moving from trust deed to bankruptcy

Unfortunately, despite the greatest efforts of trustees and unfortunate parties, many people may well be forced to move from a trust deed to bankruptcy. Again, if this is a potential option then you do need to take professional financial advice as soon as possible and ensure that your trustees are fully aware of your financial situation and any changes. You will need to go through your trustees if you are looking towards moving to bankruptcy and they will contact your creditors and make the necessary arrangements with the courts.

While bankruptcy is obviously a fairly severe way to combat your financial problems it is not the end of the world as many would have you believe. There is no point in banging your head against a brick wall and trying to pay off debts which you know in your heart of hearts, as do your trustees, that you will never be able to pay back. Sometimes your financial position will worsen to a situation where you are unable to pay anything back to your creditors and you will need to file for bankruptcy.

However, bankruptcy today is very different to that of many years ago and the stigma which has historically been attached to bankruptcy is no more. It is not an easy option, it is not always open but if your situation would suggest that bankruptcy is the best course of action then you should instigate this sooner rather than later. Your creditors will also appreciate, although rather reluctantly, that you are not able to pay back any part of your debts and you will need to try and wipe the slate clean and start again.

Consumer protection from debt

The authorities and the financial world fully appreciate that consumer protection from debt is something which goes hand in glove with lending money. There will be situations where consumers overextend their finances or their situations change and they are unable to fulfil their financial obligations. However, there is no point in putting these people into a situation where they are paying off their debts for many years to come and effectively stuck in a rut. Who would benefit then in the long term?

Therefore, the UK government is looking to give further powers to the Consumer Financial Protection Bureau which will monitor the activities and practices of credit card companies and debt collecting agencies. There have been growing concerns that overzealous and sometimes downright aggressive debt collecting agencies have been placing sometimes unlawful and undue pressure on “customers”. Indeed many consumers have reported their debts being transferred between various parties and the situation becoming very confusing.


If you are struggling with debt it is imperative that you tackle the situation head-on as soon as possible and ensure that it does not get any worse. Your creditors will appreciate you being honest at the earliest possible stage rather than dragging on a situation which could get very much worse. There are various options available such as repayment plans, trust deeds and even bankruptcy and while non-are preferable in the long run, sometimes they are a necessity.

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