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The subject of personal debt is a complex one because we rack up debt in a variety of ways, and they all impact people differently. Debt does not simply arise from careless over-spending or financial mismanagement. While credit cards can indeed create an economic trap, personal debt can also be accumulated in the form of mortgages, utility bills, and monthly repayment schedules for goods purchased. Most commonly, in the U.K, problematic personal debt results from a change in circumstances. 
Even the most careful budgeter can fall into a trap of personal debt when their circumstances shift unexpectedly. A household may be living within its means and paying its bills every month without fail, but how long can that continue after a loss of employment, a family breakdown, or a period of reduced income resulting from prolonged ill health? Any professional financial advisor will advocate the best practice of having at least three months’ worth of income saved for a ‘rainy day’ but, in reality, the high cost of living can make this difficult to achieve and maintain. 
Finding yourself in a modern debt trap 
The Coronavirus pandemic is certainly not the only crisis of modern times to have increased the likelihood of personal debt issues across the board. The global financial crash of 2008 caused significant problems for many households, but the nature of the Covid-19 situation makes its economic impact challenging in a very different way. The extended periods of lockdown - with many non-essential workers either forced to work remotely or moved onto the furlough scheme created by the government – led to what is undoubtedly the greatest shake-up of working practices in a generation. Employers have had to re-think the way in which their businesses operate, streamlining overhead costs and re-structuring their enterprises to meet the business continuity challenges of today’s global marketplace. In some cases, this has led to redundancy and unemployment. 
The Coronavirus pandemic has further impacted personal finance through damage caused to long-term health. The effects of the infection itself are still being discovered and explored, and ‘Long Covid’ appears to be something that the population will be dealing with for the foreseeable future. In addition, the impact of the crisis on mental health continues to be revealed. This can place increased financial pressure on households – particularly those that were only just keeping their heads above water before the pandemic began; those which had perhaps only one months’ worth of income saved, instead of three; those with less secure employment, or employment in industries most severely damaged by Coronavirus restrictions and issues. 
In these heightened circumstances, it becomes even easier to fall into the trap of personal debt. Just one missed bill payment can set a household or individual on a downward slope into increasing difficulty. Unpaid bills can accumulate very quickly and, before you know it, you find yourself in a panicked situation, struggling to find your way out of a debt spiral. In these situations, many people grab onto the perceived safety of consolidation loans – financial services that essentially take over your debt in exchange for one, “manageable” monthly fee. The problem is that the personal debt management arena is filled with predatory organisations seeking to further exploit people who are already vulnerable. 
The stress of a personal debt trap can cloud thinking, leading people to make hasty decisions that lack due diligence. Debt management services come in a variety of forms, and even those from reputable, recognisable institutions such as banks bring with them significant risk. For example, many banks offer two types of debt consolidation service: 
Secured – This is a consolidation loan that is secured against an asset, such as your property. This means that you may lose your property if you do not keep up repayments. 
Unsecured – This is a consolidation loan that is not secured against an asset. This means that it is usually only available to people with a good credit rating. 
So, if you are in a personal debt trap and do not have a good credit rating, your options are limited to that which puts your property in further jeopardy. Moreover, many debt consolidation loan operators charge high fees or apply high interest rates, both of which serve to maintain the personal debt trap for a longer period. 
Personal debt is complex, but the solution is simple 
When personal debt increases and the complexities of the situation cause heightened stress, the simple solution is to seek the advice and guidance of experts. This can, at first, seem counterintuitive, because spiralling debt can cause us to instinctively try to cut expenditure. This is where calm, due diligence comes into play. Without taking some time to read the small print of the many debt consolidation loans in the marketplace today, you could find yourself paying significantly more than your actual debt level, over a longer time period. 
Consulting with experts, like Smith & Barnes Insolvency, means that you can benefit from straightforward, professional, affordable advice, delivered in a way that is tailored to your specific needs. The highly experienced team can provide cost-effective, bespoke solutions for your personal debt management. Most importantly, as licensed Insolvency Practitioners, Smith & Barnes personnel can act as Supervisor of an Individual Voluntary Arrangement, designed to allow you to continue with life, avoiding bankruptcy, while paying off your debts. 
While debt consolidation loans effectively sell your debt to an organisation, an Individual Voluntary Arrangement is a formal agreement between you and your creditors. 
If 75% of your creditors agree to the proposed terms of the arrangement, then it is implemented 
Your agreed contributions are paid to the Supervisor from your surplus monthly income 
The IVA may be time limited, with a full and final payment agreed to be made by a certain date 
Your IVA Supervisor – Smith & Barnes personnel – can continue to advise throughout the process, helping to ensure that future debt management is easier. 
While your assets may be at risk through the terms of each specific debt, the use of licensed Insolvency Practitioners in personal debt management is far more advisable than debt consolidation loans. With Smith & Barnes Insolvency in particular, you can rest assured that your very best interests are the highest priority of the team. That might be the best stress alleviation strategy of all. 
Contact Smith & Barnes Insolvency today to arrange your free consultation. 
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