Numbers published by the Financial Services Authorities durinh the last quarter of 2009 show that the number of personal debt in England and Wales is set to reach 140,000 by the end of 2010. Furthermore, numbers released by the RSM Tenon Tracker also confirm that trend, with over 35,000 people being declared insolvent during the 1st Quarter of 2010. This was a 15% increase on Q1 2009.


One of the most common explanations for the steep increase in levels of personal insolvency is the recession that hit the global economy between the second quarter of 2008 and early 2010. During that period, the UKs GDP dropped by a further 3%. This is the lowest it has ever been since the end of World War II. One of the indirect consequences of the economic downturn was the rise in personal insolvency; reaching 27,702 during the 4th quarter of 2008 alone.

There are many ways of getting out of debt, including Individual Voluntary Arrangements (IVA), Debt Relief Orders, Bankruptcy Orders and Debt Management Plans. Each of these solutions is adapts to different levels of debts. All these debt management solutions have become more popular following the recent economic downturn.

A debt management plan is the solution that best suits people with low levels of debt. Unlike many other debt management solutions, a debt management plan is not a legally binding contract between a debtor and their creditors. Instead, it consists in an agreement made on behalf of the debtor by their creditor. It aims at reducing monthly payments that may increase the length of repayments. However, the aim of a debt management plan is to help the debtor better manage their finances.

Individual Voluntary Arrangements (IVAs) are a legally binding contract between the debtor and their creditors, whereby an affordable monthly sum based on income and expenditure is payed into the IVA by the debtor. During this time, the interest rates are frozen in order to break the circle of debt. However, in order to apply for an IVA, the debtor must comply with a set of strict rules.

The debtor must have unsecured debts of over 15,000 owed to at least three creditors.
The debtor or their partner must a regular source of income from employment.
If the debtor is a homeowner, their mortgage repayments will be considered as expenditures.
If personal circumstances change during the Insolvency Practitioner will act on the debtors behalf and if appropriate will submit a revised offer for the creditors to consider.

Debt Relief Orders (DROs) were introduced on 6 April 2009 and are aimed at people who do not qualify for an IVA or any other debt solution. A DRO usually streches over a 12-month period during which the debtor will not need to make any payments towards the debts listed in the order. However, in order to qualify for a DRO, the debtor must fulfil the following criterias:

The debtor must be unable to pay their debts
Their debts must not exceed 15,000
The debtors total gross assets must not exceed 300
The debtor must not be involved in any other form of insolvency procedure
Disposable income following the deduction of household expenses must not exceed 50 per month.

Bankruptcy is a legal process that results in a Bankruptcy Order. Once such a court order is pronounced, a trustee will take over the debtors assets and oversee their finances. Any further interests and charges will also be frozen.
Each debt management solution is dependent upon debt levels, income and expenditure. They are used when a debtor can no longer keep up with the repayment of their debts.By: James DriffieldArticle Directory: http://www.articledashboard.comVisit the RSM Tenon Debt Solutions to find out more about IVA's