Member Article

North East Finance Expert's Prescription For Avoiding A New Year Debt Hangover

A North East insolvency expert has drawn up a ten-point action plan to help people in the region with money worries avoid a painful New Year ‘debt hangover’.

Alexandra Withers, North East chair of insolvency and restructuring trade body R3, is urging anyone with concerns about their financial situation to take proactive steps towards recognising, reviewing and addressing their money issues in 2022 before they cause them potentially avoidable pain.

According to the official annual figures from the Insolvency Service, North East England has been at the top of the national table for the rate of personal insolvency every year for well over a decade.

The latest official personal insolvency figures for England and Wales also showed that there were just under 9,400 cases registered in November 2021 alone, while rising living costs and the impact of the Omicron variant are expected to put further pressure on the UK’s personal finances in the new year.

Alexandra Withers, who is an associate solicitor in the insolvency department of Short Richardson & Forth Solicitors, says: “Dealing with a festive hangover can feel hard, but while a bit more sleep usually makes things better, there is sadly no such quick fix for financial problems and they can be a lot more painful for a lot longer if you ignore them.

“The North East has consistently had the highest rate of personal insolvency of anywhere in England and Wales for well over a decade, and the first few months of any new year are often the time when overspending catches up with people.

“Concerns over rising levels of personal debt after what have been two extremely challenging years for all of us remain very clear, and with every chance that there are more pandemic-related problems ahead, we could well see more personal finance issues arising here in 2022.

“There are a number of steps that people facing money worries can take to try to resolve their issues, and to give themselves the best possible of re-establishing control over their finances, they need to recognise and address their situations as early as they can.

R3’s top ten tips for managing a debt hangover are:

1. Act today. Putting off the problem is far more dangerous than dealing with it.
2. Ask for help. Much professional advice is free, whether it’s an initial consultation with a licensed insolvency practitioner, the National Debtline, Citizens Advice, or the Government’s Money Advice Service.
3. Start by working out how much you owe right now with everything combined. Work out your income and expenditure too, and don’t be vague.
4. Prioritise the payment of your debts. Identify your essential financial commitments and cut down on luxuries. Identify outstanding debts with the highest interest charges and prioritise paying these. Maintain minimum monthly credit card payments to retain your credit rating.
5. Communicate with your creditors. This will give them an opportunity to help, whilst silence on your part could see goodwill from your creditors evaporate further down the line.
6. Learn about your options. Bankruptcy, Debt Relief Orders (DROs) and Individual Voluntary Arrangements (IVAs) are forms of individual insolvency procedures which are appropriate to various levels of debt, and are highly regulated and administered by professionally qualified specialists.
7. Be transparent. Give full details about your financial situation to both creditors and the person from whom you’re receiving advice.
8. Take a breath before you choose. Don’t allow yourself to be pressurised and make sure you are talking to a regulated professional such as a licensed insolvency practitioner, rather than an unregulated provider, who may seek upfront costs, worsening the position you’re in.
9. Don’t use your credit card or ‘payday’ loans to plug the gaps in your day-to-day finances – this is a sure sign of financial trouble, and only likely to make your financial situation worse, rather than better.
10. Spend sensibly. Retailers are desperate for your cash or credit card payments, while ‘buy now, pay later’ offers are also now commonplace, but try to resist the temptations they’re offering if you know you can’t afford them.

Alexandra Withers concludes: “The most important thing for anyone with money worries is to not put your head in the sand in the hope that they will somehow disappear.

“Just as you would see a doctor if you were feeling ill, seeking early advice from a professionally qualified and regulated source is crucial if you want to give yourself the best possible chance of putting your finances back on an even keel.”

This was posted in Bdaily's Members' News section by Julian Christopher .