The recession has forced almost a million people to work part-time having failed to secure full-time unemployment, causing debt management worries to grow.
According to official figures, nearly one million people have needed to seek part-time jobs in the face of increased difficulty to land full-time work.
During the last twelve months, over a quarter of a million people who would prefer a full time position found themselves working four days per week or less, according to the Office of National Statistics.
This is over a third higher than the same time from the previous twelve months, and highlights the extent that companies are going to try and reduce the number of redundancies made. Lowering working hours rather than laying staff off is just one of the moves from many companies to reduce staff numbers to cope with the downturn.
But debt advice organisations have expressed that the lower wages can have a serious knock-on effect, causing debt problems to be prolonged.
Ivan Cooper, Chairman of the UK’s leading debt management firm Chiltern said: “It’s all well and good that companies are trying to avoid shedding jobs, but still spare a thought for those people with debt problems whose outstanding balances don’t shrink in proportion to their reduced wages.
“Whilst it may be better than losing your job completely, it still doesn’t hide the fact that there will be less money available to put towards a person’s debt management – despite the fact that loan and credit card debts will still need repaying.”
Debt advice organisations suggest seeking impartial debt help to cope with financial issues like this. Their debt advice can help to relieve finances and increase the amount of disposable income available.
In certain circumstances a debt help solution may be recommended – like a Debt Management Plan (DMP) or an Individual Voluntary Arrangement (IVA).
These enable multiple outstanding unsecured balances (such as personal loans, overdrafts and credit card debts) to be repaid with a single monthly payment – thus making finances simpler to manage.
A Debt Management Plan (DMP) helps people who are struggling with debt problems to regain control of their finances whilst still repaying balances in full. All unsecured balances are gathered together into one flexible monthly payment.
The amount you have available each month to repay creditors, once all priority payments have been accounted for (disposable income), is distributed to the people you owe money to on your behalf, and this monthly payment is flexible so can be altered according to changing financial circumstances.
This means that if you are temporarily on a reduced income (like through working part-time) which is causing you to struggle to maintain your current credit commitments, your monthly payment can be reduced so that it is still affordable for you to repay whilst maintaining a reasonable standard of living.
Debt payments are then rescheduled over a longer period of time to make the monthly payment more affordable. This simplifies finances (by only making one payment each month) and is more affordable.
An Individual Voluntary Arrangement (IVA) works in a similar way to a Debt Management Plan, but is a more formal solution. All unsecured balances are still gathered into a single affordable payment but this is repaid over a fixed period of time (usually five years).
An IVA involves an agreement with the people you owe money to which is legally binding and requires the services of a qualified Insolvency Practitioner. This agreement protects you from your creditors changing their payment demands.
Once the IVA term has been fulfilled, all remaining unsecured balances are written off – so effectively you walk away debt free.
For more information on Debt Management Plans and IVAs, or for immediate debt advice, please call the number at the top of this page.
