Citizens Advice, the national charity, has responded to today’s figures on the number of people of became insolvent during the second quarter of 2006 with advice for people in debt. The figures show a 66% increase on the same period last year.

Teresa Perchard, Director of Policy for Citizens Advice commented:

“We are not surprised by today’s figures as we have seen an increase in the number of people coming to us with debt problems. We would say to anyone who is in debt – don’t panic, but don’t ignore the problem. Let creditors know that you are having problems – they should be sympathetic and helpful. Look at your income and expenditure – don’t just try and borrow your way out of debt. What must be clear is what it will cost you and if you can really afford it. You can get free advice at www.adviceguide.org.uk or by visiting your local Citizens Advice Bureaux.”

A report published by the charity recently called Deeper in Debt revealed that CAB debt clients owe an average of £13,153 - almost a third more than they did three years ago, and the equivalent of 17.5 times their total monthly household income. It will take them an average of 77 years to pay off the money they owe at a rate they can afford.

Consumer credit debt problems brought to Citizens Advice Bureaux have doubled over the last eight years, accounting for three-quarters of the 1.25 million new debt cases dealt with by the national network last year.

Earlier this year the Government awarded Citizens Advice £33 million to provide more face-to-face debt advice in England and Wales.

Ten top tips for dealing with debt, borrowing and budgeting:

1. If you are in debt, don’t ignore the problem. Tell your creditors if you are having problems paying them.
2. Work out how much you think you can realistically afford to pay back to creditors.
3. Pay the most important things first like mortgages, rent, council tax, and gas and electricity, not just the person who shouts the loudest.
4. Check your income and see if there is anything you are entitled to that you are not getting, such as benefits or tax credits.
5. Be wary of borrowing more money to pay off existing debts.
6. When looking at borrowing money, spend time shopping around, researching what is on offer and getting advice. Never borrow money on the spur of the moment. Always look at the total amount you will have to repay.
7. Always try and pay of at least 10% of your balance every month on your credit cards.
8. Try and save something every month and allow for planned spending in your budget, such as Christmas and holidays.
9. Look at your income every time there is a change in your income or any other change that affects your finances.
10. If you do get into difficulty, seek free advice.

* Explanation of debt remedies:

Bankruptcy - is one way of dealing with debts you cannot pay. Bankruptcy proceedings free you from overwhelming debts so you can make a fresh start, subject to some restrictions; and make sure your assets are shared out fairly among your creditors. In England and Wales it costs £475 to go bankrupt. In most cases you will be discharged from bankruptcy within a year and, with a few exceptions, any remaining debts will be written off.

County court administration order - If one or more of your creditors has obtained a court judgment against you, the county court may make an administration order. Administration is a court-based procedure whereby you make regular payments to the court to pay towards what you owe your creditors. Your total debts must not be more than £5,000 and you will need enough regular income to make weekly or monthly repayments. You do not have to pay a fee for an administration order but the court will take a small percentage from the money you pay towards its costs. The government is considering changing the rules for administration orders to increase the debt limit to £15,000 and require debtors to have at least £50 per month available income after essential expenditure.

An Individual Voluntary Arrangement - is a legally binding procedure which allows you to pay off your debts over a number of years. Some of the debt may be written off and you may be able to keep assets like your home. An individual voluntary arrangement begins with a formal proposal to your creditors to pay part or all of your debts. You need to apply to the court and you must be helped by an insolvency practitioner. Any agreement reached with your creditors will be binding on them. Insolvency practitioners charge fees to set up proposals and monitor the voluntary arrangement.

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