Task to get debt free may become harder as growth slows

Many consumers may find the task of getting debt free gets harder as new figures have indicated the UK economy is weaker than previously believed.

The Office for National Statistics has issued a revised estimate for the level of gross domestic product in the UK between April and June, with this quarterly figure being cut from the previously assumed 0.2 to 0.1 per cent.

Although there was still growth in areas such as construction and manufacturing industry – although less than in previous quarters in the latter case – the level of consumer spending dropped by 0.8 per cent in the quarter, which is bad news for the retail sector.

Weak economic growth and the possibility of another recession may make debt problems worse for many as businesses could fail and jobs be lost, with those who become unemployed being particularly vulnerable to becoming unable to pay back what they owe.

For people in extreme debt, an individual voluntary arrangement (IVA) may be the best solution.

While this is a form of insolvency, an IVA can help cut the overall amount owed, stop the build-up of interest and set lower repayments, which can be made over a period of not less than five years.

To be agreed, the deal must be accepted by at least 75 per cent of creditors.

Fears of a new recession have been increased by the eurozone crisis, with prime minister David Cameron stating in a BBC interview this week that there are "very serious clouds on the horizon" as finance ministers in the single-currency bloc grapple with their debt crisis.

By James Francis