DMP, IVA or Consolidation Loan?

Homeowners who are struggling to pay off their mortgage could sell their home and wipe out all debt owed, it has been advised, a move which could be a wise one to make in a household's debt management route.

Or, lenders could offer people reduced repayment terms in exchange for a larger equity stake, says Al Elliot, an advisor at the Homeowners Advice Centre.

"After all, lenders still own the asset - the house - which everyone knows in the long term will recover its value, so the last thing lenders want to do is to try to sell in today's market," he says.

But for those people who have seriously fallen behind in their mortgage payments, the only option available to them could be to file for bankruptcy, although this may be considered as a final resort should no other solution be found.

The Council of Mortgage Lenders reported in October 2008 that around 45,000 properties could be repossessed this year.

However, people may want to be aware that if they file for bankruptcy, assets owned - such as a property - could be sold.

Business insolvencies have increased as the year has gone on, it has been claimed, which could have potential consequences for the debt management of small firms.

According to the Insolvency Service, company bankruptcies have increased by 10.5 per cent in the third quarter of 2008, compared to the previous quarter.

Furthermore, the problem is exacerbated by invoices not being paid by customers, David Thomson, chief executive officer of Close Invoice Finance, has warned.

Commenting on the latest figures, he said: "Any small and medium-sized enterprise looking to minimise the impact of this growing threat should be focussing attention on careful management of their sales ledger and debt collection processes."

The Insolvency Service also found that there was a shift towards bankruptcies resulting from a debtor's petition, rather than a creditor's request, which could encourage some households that bankruptcy may be a viable option if debt is severe and cannot be repaid.

Meanwhile, people considering this route may find it useful to hear that essential tools and books needed for work may not be taken away by a bankruptcy court order.

In news which may have surprising consequences for the debt management of households, research has found that men are the worst culprits for secretly spending behind their partner's backs.

Men keep a spending average of £42 a month secret from their other half, Fairinvestment.co.uk found, compared to the £27 that women do not admit to dishing out, although if shopping becomes a more serious issue bankruptcy may be an option to consider.

"As the UK heads towards a recession, there is a chance that secret spending between partners may increase, as when money is tight we are less likely to own up to spending money on non-essentials like a new handbag or perfume," commented spokesperson for the website Rachael Stiles.

Couples who do take the bankruptcy route may want to know that vehicles, tools and books needed for employment will not be taken away.

In addition, people may be subject to an income payments order where some of a wage will be diverted to creditors.

People can take steps to make sure that they get to keep as much of the money they earn as possible, a finance journalist claims, advice which could have consequences for some people's debt management ideas.

Speaking about how people can save money during the shaky economic climate, Cesarina Holm-Kander said that the steps are obvious but some may have trouble taking the information on board.

Cutting back where possible, thinking before money is spent and avoiding purchasing buy-one-get- one-free items which they normally would not buy are all money-saving tricks people can follow, Ms Kander suggests.

Furthermore, such advice should be followed before people reach the position of "debt deluders", which she describes as those who know their finances are in a mess and set to get worse, but avoid financial matters and leave bills unopened.

But people who are seriously in debt and can find no other solution may want to consider bankruptcy, after Credit Action reported that the average UK household debt is £59,350.

The final debt relief option, bankruptcy may restrict future employability, while people may have to make contributions from their wages to pay off debt owed.

A third of UK households are paying up to £1,200 more on everyday spending than they were this time last year, a survey reveals, which could be a scenario many people are currently finding themselves in while looking for a suitable debt management solution.

While 24 per cent of those questioned by American Express say they are paying up to £50 more each month, 19 per cent claim that they are spending up to £150 more, an annual increase of between £1,212 and £1,800, according to the credit card company.

"Each British household is paying out thousands of pounds a year on debit cards for everyday items such as supermarket shopping and petrol," Tom Allder, vice-president of UK lending at American Express, claims.

Although considered a final option for managing debt, some people may want to consider bankruptcy after two-thirds tell American Express that they think their financial situation will worsen over the next 12 months.

Once declared bankrupt, a person may not be directly contacted by creditors, who instead could maintain contact via an official receiver appointed by a court, which may be a relief for those struggling with debt and worried about the consequences.