Debt Problems: There May Never Be A Better Time To Face The Music.

Three in five people plan to increase spending this year, as the cutbacks of the last 18 months in most households are replaced by the need to treat ourselves. But with figures showing Brits borrowing 62p for every £1 we saved in the last three months of 2009, it seems that millions are not dealing with their debt problems.

However now more than ever there is a favourable climate for the indebted to come in from the cold and negotiate with their creditors, with government backed schemes that can help write off up to 70% of your debt.

If you have more than £15,000 in debt and you are struggling to repay, you may need to consider using an Individual Voluntary Arrangement (IVA) to sort your problems out, and get your creditors off your back.

Pros: It is a formal, legally binding agreement with your creditors to help you repay debts. You will often be able to pay back less than you actually owe. It is handled by an insolvency practitioner, who will negotiate with your creditors. It is not the same as bankruptcy. Lenders, if they have not already done so, will be unlikely to push for County Court Judgements against you once it is in place, as it is a legal agreement, so there is little point. This can save your credit rating, as CCJs will appear for six years. An IVA, once cleared, will put your credit rating back to ‘normal’, so there is no lasting effect.

Cons: You have to keep up with agreed repayments otherwise you could face bankruptcy. Some lenders may not agree to the IVA, and at least 75% of them have to. It will take up to five years to clear debts through an IVA.

Any exclusions: You have to have debts of more than £15,000 to qualify.

Alternatives: You can try to speak to your creditors yourself, but you may get less sympathy or help than they would extend to a professional helping you. You could declare yourself bankrupt for debts of as little as £750, but this has severe ramifications for your financial future.

Further reference: Speak to a debt adviser Related: Latest debt news