UK levels of debt are rising and the numbers of people going bankrupt are greater than ever. However a large number of these could have avoided the pain, expense and embarrassment of going bankrupt by having a chat with a financial consultant who might have recommended a different way out. One that did not involve the public courts and has far less of a ?hit? on your financial records.

Not having enough money to pay your bills is usually something that creeps up on you. You start organising your finances but after a while some bills get larger and there always seems to be something popping up that robs you of a little more than you intended to spend then suddenly there's too much month and not enough money. Then the letters start arriving demanding payments and if you cannot make those payments or just ignore the letters the phone calls start. They are polite but firm at first but if you make promises and don't keep them then court letters and possibly bailiffs appear, by which time you may have County Court judgements against you and black marks on your credit record which will make it impossible to get one more loan to consolidate everything to help you back on track. Bankruptcy beckons.

Although bankruptcy is sometimes seen as a way of wiping out all your debts, it may not be necessarily so. The Official Receiver, the government officer who deals with your debts, will look at all your assets, including your house and car and may force you to sell them to realise capital to pay off those debts. He will check your salary and decide how much you need to live on before arranging possibly sizable deductions directly from your wages to pay your creditors. Depending on the size of your debt this may be for several years and you will have major credit red marks for up to 6 years after that with the credit reference companies (Experian, Equifax etc).

Fortunately, even at this apparently late stage, there is still a chance to redeem yourself and your finances. By talking to an independent financial advisor they can arrange something called an Independent Voluntary Arrangement or IVA. This starts with a meeting between the debtor and his creditors to sort out an acceptable level of payment for a given term. The creditors will freeze any further interest payments and call off any further action to reclaim the monies to give the debtor some mental relief. If these payments are kept up for the given amount of time, at the end of that time the remainder of the debt is written off and although there will be some blemish on the debtors financial records it is not as bad as the stain of bankruptcy.

Although an individual can arrange an IVA himself, it is more likely to be accepted by the creditors if it is arranged through a financial advisor as this will be a single point of contact for all parties involved. The debtor does not have to run round several companies paying them all out and only has the one person he needs to talk to each time. The creditors also see a responsible financial professional in charge of their payments and may settle for a lower settlement figure than if an individual tried to sort out the IVA terms.

Although of course the best way to get out of debt is not to get into it, circumstances can conspire against the best financial plans. If the worst comes to the worst, consider talking to a financial advisor or specialist debt management company before considering bankruptcy. It could be the best way to get your money problem sorted.