The United States Federal Reserve Bank has just offered an $85billion emergency loan to AIG, while Arnold Schwarzenegger asked the same Reserve for a $7bn loan to make up a shortfall in taxes. Similarly, the U.K. is suffering a similar fate. First Northern Rock, then Bradford and Bingley, now the FTSE 100 has just dropped 7.85% wiping out £93billion off share prices - a bigger slide than after the terrorist attacks on the World Trade Centre in 2001.

Although the Bank of England has stated that it will inject £40billion into the U.K. economy to try and stem the flow, there is no guarantee that these funds will not be swallowed up by a continuing slide into economic crisis. The British Chamber of Commerce has claimed that the U.K. is already in recession and even major banks such as the Royal Bank of Scotland and Barclays are shedding stock prices, as are other financial institutions around the world. The problem seems to be reaching epidemic level and it is unsurprising that more and more people are turning to debt management companies to get their finances in order.

Are You Scared of Bankruptcy?

Bankruptcy is a word that scares us all, but it no longer has the stigma that it once did. The word itself is simply another form of debt management and means that you will be freed from the debts that you cannot pay. There are, however, certain implications that must be considered when filing for bankruptcy, including having a poor credit rating, not being allowed to run your own company and losing control of your assets. However, depending on the size of your debts your bankruptcy could be discharged after only one year. If it is something that you think is on your horizon you should seriously consider whether it is the right choice for you.

Your first step should be to contact your creditors in writing (those to whom you owe). Explain the situation and offer them a timetable of exactly what you can pay them and when and ensure that you keep copies of all correspondence. Furthermore, you must be aware that any arrangement made directly between you and your creditors is not necessarily legally binding and you could still be faced with the prospect of having to meet the repayment in full in the future.

Your other option is to consult a debt management company. This will ensure that you have someone acting on your behalf that can form a legally binding contract with your creditors. This will mean that any payments that you must make will be fixed, both in time and amount. If the company operates ethically you will not be required to pay them any extra fees, but it is important to check this before you agree to any form of contract.

When considering your finances the whole scenario can sometimes seem like a minefield, especially given the financial headlines that we read on a day-to-day basis. The important thing to focus on is that every individual situation is different and requires different approaches, whether it is in the form of advice from the Citizens Advice Bureau or a debt management company, and from individual arrangements to full-scale bankruptcy. Nevertheless, if you think that you have a problem - or that you could have a problem - as with anything in this world actions speak louder than words.