Nowadays with the credit crunch, does bankruptcy still carry a social stigma? Not as much as it used to, when you rarely heard of people going bankrupt.But in these uncertain times, it is not nearly so much of a stigma.

In fact, there is often admiration, support and a lot of sympathy if someone, who has been trying to run a business, has gone bankrupt. People feel that at least he was trying to do something. It may not have worked out, but that’s just how it goes.

If a person goes bankrupt because of personal debts, there is also concern and sympathy. In these uncertain times, many people feel very concerned about their future and their jobs and feel bankruptcy could happen to anyone. Everything – your mortgage, your bills – all depend on having a regular income. Nowadays, there is no such thing as a “job for life” and jobs which used to be considered safe and secure, like banking ….. Well, need we say more? Even people employed by government departments are no longer safe, because these departments are often undergoing change and “rationalisation”. Head counts are often being done and everyone nowadays fears for their job.

In the past, people were thought feckless if they became bankrupt because of debt, but now our whole system has been built on buying things on “credit”, and it is not surprising that so many people wrack up debts on several credit cards …. And the banks encourage them to do so and are still encouraging people to take out credit cards. How many of us have had unsolicited mail offering us credit cards or loans in the post recently?

I remember years ago an uncle referring to credit as the “glad and sorry” – glad to have it, sorry to have to pay for it. Perhaps people will think a little more now before taking on too much credit.

Both of them are legitimate ways out of debt. Which is better? Well like most things it does depend on your individual circumstances. With bankruptcy your debt is written off, but there is a cost; with IVA only some of your debt is written off.

An IVA or Individual Voluntary Arrangement is where you set up an agreement with your creditors to pay off part of your debts. The amount you pay per month is based on what you can afford and it lasts about 5 years.. You can set up an IVA if you are at least £15,000 in debt and can afford at least £200 per month. Up to 75% of the debt can be written off.

For an IVA, your circumstances will be taken into account – like how much you earn, how stable your job is (is there such a thing as a stable job nowadays?) and how much you can afford per month. So this is not suitable for everyone as you need to have regular money coming in and you need to be able to afford the repayments each month for 5 years. If you fall behind with the payments, you risk being made bankrupt.

With an IVA, your debts need never be known to your friends, family, neighbours or work colleagues and as long as you can keep up the payments, you will have a clean slate within 5 years. An IVA is an arrangement between you and your creditors – no-one else need know, unless you tell them.

Many people regard bankruptcy as a “cop out”, because all your debts are written off and the bankruptcy may even be written off after a year, but this does come at a cost. The bankruptcy remains on your credit reference file for 6 years, so you will find it hard to get a mortgage or any form of credit. Your credit rating is damaged and this can last for many years to come.

With bankruptcy, you also have to declare your bankruptcy in the local newspaper, so all the busybodies in the neighbourhood will know about it – it will be great gossip-fodder for them. This is not very good if you are a private person who doesn’t like to share their financial distress with the rest of the world. You also will find many jobs closed to you – not just high powered jobs like Financial Director of a company, or Company Secretary, but also normal administrative jobs in the Financial Sector. You also can’t practise as a lawyer or chartered accountant..

Basic things like running a current banking account or having a credit card will be closed to you. You will only be able to hold a basic bank account with no direct debits or overdraft facility or even cheque book. So bankruptcy is a step not to be taken lightly as it impacts on so many areas of your life.

Creditors prefer IVA to bankruptcy, because they get at least some of the debt back. IVA is an alternative and should be considered provided you can meet the minimum monthly repayments.

As we live in the grips of the credit crunch and the uncertain future of the economy, cutting down on unnecessary spending should be something that everyone is looking at. Cutting out the unnecessary will allow you to save some money, and, if you are in debt, help you to start climbing out.

The first step to cutting down is to budget. Whether you want to do it on old fashioned pen and paper, or using a state of the art spreadsheet, the principle is the same. Your incomings need to total more than your outgoings. The key to a good budget is to make it a yearly one, since many outgoings, e.g. holidays or Christmas, are only at certain times in the year. Start by writing down any money you receive – wages, benefits, rent from a tenant, etc. Write everything down, even if it is only once or twice a year.

Next, write down all your outgoings – mortgage/ rent, bills, credit cards, car, food, entertainment, satellite TV, presents, etc. Keep going through the list until you are sure you have included absolutely everything that you spend in a year. Assign a total to each item, and then add up all your incomings, and all your outgoings. If your incomings are greater than your outgoings, then you are already in a great position – you have money left over that can be put towards existing debt, or if you are debt free, then can be put into a high interest savings account.

However, if your outgoings show the greater figure, then you have some work to do. First of all consider the incomings. Is there any way you can increase these? Would you consider taking a second job? Can you take in a lodger? Are there any additional benefits you are entitled to? Once these possibilities have been exhausted, it is time to try and cut out the unnecessary spending.

Take each item on your outgoings list in turn, and try to reduce it. Shop around for a better mortgage deal, shop around for better insurance quotes, work out if you can leave the car at home and take public transport a few times a week, consider whether you can live without satellite TV, or that weekly meal out. Shopping bills can often be reduced by buying supermarket own brands, rather than brand names. By systematically trying to cut the cost of every single item on your list, you will be cutting out unnecessary drains on your money, and will hopefully end up with a total that is less than your incomings, allowing you to save!

It is very easy these days to get into debt just through the cost of daily living. It is a sad fact that house repossessions and bankruptcy are becoming more and more common every day. In order to avoid such drastic measures being taken, it is important to take a look at your finances and work out where cut backs can be made.

Simple measures such as changing your shopping habits can make a huge difference. Instead of just picking your usual brands, have a look around the supermarket shelves for alternative brands which may be cheaper. Supermarket own brand goods are usually as good as the leading brand but at a much lower price. By swopping some of your goods for cheaper brands, your shopping bill should easily decrease. Also,look out for special offers and buy one get one frees, but weigh up which is the cheapest option as the own brand items may still be less expensive. If you can afford to, why not put your savings into a high interest bank account. It may only be a few pounds to start with, but this will soon add up over the months.

Why not have a girls or lads night in instead of spending all your money in the pub. A night in with a few drinks is much cheaper and makes a nice change.

Stop spending money on take aways and lunch. By making your own lunch everyday and cooking for yourself will save you money. If you like fizzy drinks or bottled water, then make sure you buy a multi pack from the supermarket instead of buying them everyday from the newsagents. This kind of saving soon adds up.

If you are prone to clothes shopping and you know that you won’t be able to resist buying something from your favourite store, then simply don’t go in there. If you can’t afford it you will only regret it afterwards and if you didn’t know it was in there to start with then you can’t miss it.

For everything you buy, stop and ask yourself if you really need it. Even down to the simple things such as buying magazines and newspapers. A newspaper at 50p a day will cost you over £10 a month.

If you can afford to, open a high interest savings account and set up a standing order for a small amount to be transferred from your current account every month. You will soon forget about this money coming out of your account and you will learn not to miss it. Don’t over stretch yourself though. Just a small amount every month will soon grow and you will have interest added onto it too.

By learning how to be more frugal with your money and having some self discipline will help you to become more financially stable and avoid the stress of debt, and you will find that you don’t need all the things that you used to spend your money on.

I have never lied to my family about debt as such, more that I haven’t mentioned it. I prefer to keep it to myself and deal with it. The only person that is aware of it all is my partner, although his debt problems are much more serious.

My partner ran up lots of debts whilst at university, being lured in with cheap credit deals. When I first met him he was still a student whereas I was in full time work, therefore I helped him out. To be honest this i where my debt problems started as I was helping him out with more money than I could really afford.

As far as I was concerned his problems were solved but recently he announced to me that they were as bad as the ever were, mainly due to overdrafts and opening statements. He has no idea how much he is spending.

This has caused a great deal of tension between us because as far as I can see he hasn’t learnt from his past money problems. Maybe I am to fault for bailing him out but I just wanted to help. Now I am worried about what will happen in the future.

My husband and I have a lot of debt - about 80k, and thankfully it’s manageable because we’ve got a good income and should have it paid off in about 3-4yrs. But I didn’t work for a while after having my son and it was really tough.

To begin with, we didn’t really admit to each other that there was a problem, and buried our heads in the sand. Eventually things came to a head when we realised we were struggling to make the repayments, and we had a massive argument about who was spending the most! From then on, we have talked about all purchases and financial decisions, and spend a lot of time discussing ways to make more money, reduce interest and pay things off as quickly as possible.

We actually quite enjoy the challenge of paying our debt off now, and some of the things that we do to save money, such as having picnics instead of eating out, going swimming instead of shopping etc actually bring us closer as a family.

I’d recommend to anyone in debt that they talk about it with their partner, as it really does make a huge difference to have two heads dealing with the problem rather than just one.

The primary responsibility for the financial education of children lies with their parents. They have chosen to bring them into the world, and should give them an upbringing that will provide a greater chance of coping with the realities of adult life. This includes teaching them how to handle money responsibly.

The best way is to lead by example. If children grow up seeing their parents spending wisely, and have to wait for special occasions for major treats, they are likely to maintain those habits once they are working and managing their own money. They should also learn the habit of working through doing a paper round or jobs for the neighbours, and get a Saturday or holiday job once they are old enough. These earnings should be divided; some may be spent straight away, some saved for something they really want, and the remainder left to grow in a savings account.

If, by contrast, children are given money and the latest gadgets whenever they want, and their parents buy things they can’t afford, then they are likely to adopt the same attitude. This may jeopardise their financial future, if they come to believe that debt is acceptable, and credit is the easy answer to getting what they want.

debt. small word - BIG problem.
Ive never been in debt myself, but my parents - well thats a different matter. When my mum and dad divorced several years ago, each had a variety of debt - credit cards, personal loans, car loans which they each took their seperate ways. both later remarried, but for some reason my mum never told her new husband about the debt she was bringing to the marriage. time went on, and she was finding it harder and harder to manage the repayments until it got to the point where she was getting phone calls from debt collection agencies almost daily.
the worry was killing her - literally - her blood pressure went up, she was physically sick. not about the phone calls, she could handle those - but at the thought her husband MIGHT FIND OUT ABOUT IT.
My mum then transferred her address for the debts to my house - all to stop her husband finding out. needless to say i was furious and things havent been as rosy between mum and daughter since.
I’d love to say she has found the courage to tell him, but the situation continues on with the secrets and lies. I only hope one day she does do the right thing as at least together they could face the problem and sort it out.

I have never lied to my husband about debt, mainly because he is just as bad as me when it comes to spending money. I do however sometimes lie to my mum about it. I really shouldn’t as she has helped me out of debt in the past and I know she only wants to help. I think its because I am ashamed of my situation and I feel I have let her down that I feel the need to lie. Its easier than telling her the truth.
With regards to the stress side of it, definitely. Money worries and debt are the number 1 cause of stress and arguments in mine and my husband’s life. It is all we ever argue about. He likes to brush the problems under the carpet while I sit and think about them for ages then we just argue. Debt worries is even one of the causes of me suffering from depression.

It really makes no sense as being rich and having lots of money is not something that is important to either of us. The fact that both we and our daughter are healthy is the main issue, so why on earth can money really rule our emotions the way it does.

Woke up to the fact that your money is working against you and not for you? Put the kettle on and take a deep breath.

In order to get out of debt, you need to ensure you know exactly who you owe (have any debts been passed on to collection agencies?) and how much you owe them. You also need to find out the rate of interest you are being charged by them on this debt. This will be a figure on your credit card statement or loan agreement, if it’s shown as a monthly percentage simply multiply by 12 to get your annual percentage rate (APR). Credit cards can charge anything from 0% (for a time!) to a whopping 34.9% interest on your debts.

When you know who you owe, and how much, prioritise them. Mortgage / Rent and Council Tax / taxes are the most important. You need to ensure you have a roof over your head, and falling behind on tax payments can land you in court or prison. Prioritise the rest by their percentage rates - you need to work on clearing those with the highest percentages first, whilst meeting minimum payments on all the rest (to ensure your credit file isn’t damaged).

Also, take a look at what exactly you are spending your money on. Keep a spending diary for a month and write down everything - cups of coffee, lunches, magazines, everything. Even when you pop to the shop to grab a missing ingredient, add up the totals. If you find yourself wasting money at lunchtimes, make pack lunches. Spend money on newspapers? Read them online for free instead. Analyse everything.

Take a look at all the Direct Debits and Standing Orders you have coming out of your bank account. Do you still need them all? Should you have cancelled any? Can you cut back on any, such as Sky or gym membership for the time being?

Once you’ve started looking at how you handle your money, and worked out where you can start cutting back and saving, you’ll be well on the way to clearing your debt. It may be a long struggle and take a long time, but it doesn’t have to be a miserable process. If you find yourself missing takeaways, take the time to learn how to make similar dishes yourself. Missing magazines? Subscribe instead and save yourself money. Continue shopping around for everything and let your money work for you.