Debt Problems

On the 4th January 2011 VAT in Britain will raise to 20%

. The raise in VAT means that practically every sellable item from food, petrol, DVD's and even gas and electricity will increase in price by 2.5 percent.

Unfortunately this also means that if you have debt problems and are currently in an IVA (Individual Voluntary Arrangement) then the cost of any payments you make will also go up.

As a result of this increase it's more important than ever that you prepare and plan your budget to prepare for the financial difficulties you'll be facing in the New Year. If you don't act now then you may face problems keeping up repayments and staying on top of your debt problems.

The VAT increase won't just affect those people currently involved with a debt solution. You might be on the verge of coping with your finances and the VAT increase might mean you're pushed over the verge and you can't afford to pay the increased rate on vital services such as electricity and gas. If you are worried about this happening to you then it's important that you deal with your debt problems as soon as possible and seek appropriate help.

Whatever you do not borrow any more money in an attempt to clear your current debt problems. You need to think sensibly and make sure your problem doesn't get worse.

In readiness for the VAT increase you need to re-assess your monthly expenditure to take into account that you'll be paying more for everything. It's very unlikely that your income will increase to accommodate the VAT rise so you're going to have to cut back even more and look at your monthly outgoings.

A good place to start is your dispensable income, if you have debt problems and are repaying via a IVA or debt consolidation scheme then you will already have scaled back your dispensable income (luxury items such as socialising, cigarettes, alcohol) to what you feel is an unreasonable level. Sadly you are going to have to scale back even more, but remember it'll be worth it to keep up your repayments so you'll eradicate your debt problems in the end!

If you genuinely can't scale down your living expenditure any more then you can try to reduce the payments to your creditors, but this is very much a last resort as it may mean that your creditors will apply late charges to your debt, resulting in you having to begin the whole process again.

by: Bill Weston

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