A growing number of people are struggling to manage their monthly debts as mounting financial pressures have led to a significant rise in personal insolvencies this spring. Experts warn that many households now have very little flexibility for extra costs, with the current economic climate remaining challenging.
Record insolvency figures
Figures from Money Wellness show that 12,252 people entered insolvency in March, marking a 30% increase compared to the same period last year. Financial specialists are closely monitoring these trends as the cost of living continues to impact local communities across the UK.
Matthew Sheeran, a debt adviser at the organisation, explained: "We are seeing more people using credit to get through the month. When that's the approach people are taking, debts can really build up quickly." He believes the situation is fuelled by high living costs and recent fuel price spikes.
Disposable income under pressure
"Disposable income has just dropped significantly. And it doesn't take much to drag people to a point where they might need debt advice or debt solution. We're seeing that people just don't have the resiliency they used to have to absorb financial shocks," Sheeran added.
Despite the pressure, Sheeran insists there are ways to move forward. "You don't need a perfect plan. You don't have to have everything mapped out from point A all the way through to the end. Just get that plan started."
Step 1 - Document everything
"Get clear on what you owe to different creditors. So many people will understandably bury their heads in the sand and not know exactly what they owe and who they owe it to, so get a list together of everyone that you owe money to," says Sheeran. "How much do you owe to those lenders, and how much are they asking for each month? Jot down what the interest rates are as well, to help you make a better-informed decision on which to prioritise." This helps to unclutter the mind. "That first step can often be painful, addressing it is hard, but once you've done it, everything just feels that little bit more clear."
Step 2 - Protect your essentials
Before addressing secondary debts, "make sure your priority bills are covered. So make sure you've got enough money for your rent, your mortgage, council tax, your energy. They're the ones that need to be accounted for first. That's going to really allow you to get a sense of what you've got left to put towards your non-priority debts," says Sheeran.
Step 3 - Check for extra support
"Are there additional benefits you're entitled to that you weren't aware of? A lot of people that receive Universal Credit are actually eligible for different elements of Universal Credit. It's making sure you get everything you're eligible for, like council tax support," says Sheeran. "Different councils have their own discretionary funds, so it's just trying to tick all of those boxes, because it might be that you're entitled to more than you think." Use a calculator like Turn2Us to check. "For the average person we've supported, we've noticed they're eligible for an additional £250 a month for benefits, so it's not like £30. It's an amount of money that can make a real difference to repaying your debts," says Sheeran.
Step 4 - Explore available grants
"Try to receive any extra grants you might be entitled to, especially if you've got debts within priority bills. A lot of utility providers have schemes and grants that can actually clear your debt if you're in financial hardship. So tap into those resources. If you're able to address big energy debt, that's going to make everything else a little bit easier," continues Sheeran.
Step 5 - Communicate with lenders
"If you've got a number of non-priority debts (like credit cards etc.), it's about getting a plan in place that's suitable for those lenders. Just by picking up the phone and speaking to your creditors, there is actually more they can do to make your payments more affordable," says Sheeran.
Step 6 - Avoid further borrowing
"I've seen it in customers I've supported that maybe don't realise they can't catch up, and they take out additional debt, thinking things will get better. But once your debt becomes unmanageable, that's not a sign to take out additional credit. It's a sign to get support with the debt you've already got," warns Sheeran.
Get help with debt
If you're struggling financially, there are charities out there who specialise in helping you find manageable solutions. Organisations like Money Wellness, National Debtline and StepChange provide free guidance. If you feel overwhelmed, seek professional assistance. "If debt's becoming unmanageable, or you see a significant change in your circumstances, pick up the phone and speak to a free debt advice organisation who will just be able to give you that starting point," says Sheeran.
Contact details for free debt advice services: Step Change: 0800 138 1111, Monday to Friday, 8am to 8pm, Saturday, 9am to 2pm; Citizen's Advice (England): 0800 144 8848, (Wales): 0800 702 2020, (Scotland): 0800 028 1456, Monday to Friday, 9am to 5pm; National Debtline: 0808 808 4000, Monday to Friday, 9am to 8pm, Saturday, 9.30am to 1pm; PayPlan: 0800 316 1833, Monday to Friday, 8am to 8pm, Saturday, 9am to 3pm; MoneyPlus Advice: 0161 837 4754, Monday to Thursday, 8am to 7.30pm, Friday, 8am to 4pm; Money Wellness: 0161 518 8285, Monday to Friday, 9am to 8pm, Saturday and Sunday, 10am to 4pm; Debt Advice Foundation: 0800 043 4050, Monday to Friday, 8am to 6pm.
