The British government recently introduced the Debt Relief Order or DRO for short to help low income families. The issue associated with this order is that families must have under £15,000 in unsecured debts and must also have assets under £300. This means that families that are homeowners do not fall under the Debt Relief Order’s inclusions.

Of course, with stipulations like this many people will be filing for bankruptcy rather than solving their debt problems. R3, an insolvency trade body, said that personal bankruptcy filings will reach a peak of 158,820 by the end of the year. This number totals out to about 435 people filing bankruptcy or entering an Individual Voluntary Agreement daily.

These statistics aren’t helped by the number of unemployed Great Britain is expected to have by the end of 2009…2.9 million according to the Confederation of British Industry. In the past (and sometimes now) the unemployed families are finding that they are digging themselves further and further into debt by buying every day essentials like food and paying the utilities just because they are buying these items on credit. What money they are making is likely not going to paying off credit cards or other debt obligations.

While some debt solutions are not available to families that are strapped for cash, there are still many solutions available. Debt Management Plans can be suitable for families with smaller debt loads, however this is not a legal binding agreement. Individual Voluntary Agreements require the debtor to have over £15,000 in unsecured debts owed to three or more creditors, but they have to have a regular income to be eligible. At the same time, many people are finding themselves unable to negotiate wages due to high unemployment (employers currently have the ball in their court). So those who may not be able to pay down their debt, but still have a job will be able to use the IVA .

Of course, there is a large group of people where bankruptcy remains the only real option when it comes to their debt woes.

If you know someone who is looking into filing for bankruptcy protection, be a friend and make sure they know all the real issues associated with such a harsh financial decision. A bankruptcy filing will follow them for at least seven years on their credit report and will make it very difficult to get credit for any purchase they may want to make.

Source:
http://www.debtfreedirect.co.uk/news/NewsUnemployementAffectsFamiliesFinance/