Many people are afraid of debt collectors as fear these people will exacerbate their financial problems. This is, of course not true in most cases.

High Court Enforcement Officers (HCEO) are one type of debt collector. They execute the Judgments and orders of the High Court and County Courts of England and Wales.

HCEOs collect money that debtors owe to creditors and may sell the debtor’s possessions to pay the unpaid debts.

Debt collection is a necessary evil, especially during a recession: many people ignore lawyers’ letters and court orders. Some even ignore previous visits from a HCEO.

Difference between high court enforcement officers and debt collectors

Debt collectors mostly operate telephonically and may not repossess a debtor’s property; HCEOs visit debtors and may repossess their property to repay creditors.

There are a number of things that these officers may do: warrant enforcement, rent distress, possession, repossessions, eviction, and tracing.

Creditors can apply to the high court for a number of writs that can recover money from their debtors; however the most popular is the Writ of Fieri Facias, usually abbreviated to the Writ of Fi Fa, which is issued in the High Court after judgment is obtained in a legal action for debt or damages.

Other possible writs are

•    A “Writ of Venditioni Exponas
•    A “Writ of Distringas Nuper Vicecomitem
•    A “Writ of Fieri Facias de Bonis Ecclesiasticis
•    A “Writ of Sequestrari de Bonis Ecclesiasticis

The High Court can only enforce writs on amounts of £600 and more. Amounts that are less than £600 must be enforced in the county court.

The BBC followed Scott, an HCEO from an Essex-based debt collection agency for one day to find out what is it like being a debt collector. He had the High Court’s permission to get £4,000 – in cash or goods – from one debtor. He also stopped by a second debtor’s restaurant during that same day.

Scott started removing the first debtor’s office equipment even though she had asked whether she may repay the debt in instalments. He then goes to the second debtor, a restaurant owner, and gets the money that the debtor owes without much difficulty.

The Office of Fair Trading has a guidance (pdf) that all debt collectors should abide by. Most HCEOs do adhere to these guidelines and complaints against HCEOs have dropped since the introduction of the guidance.

It is important that consumers know their rights when dealing with HCEOs.  Complain to the Association Secretary if an HCEO’s behaviour does not conform to their Code of Practice.

Information on your bankruptcy will remain on your credit file for six years. The official receiver should publicise your discharge or you should send CallCredit, Equifax and Experian a certificate of discharge so that your credit file can be updated.

It may still be possible to get credit after you have been discharged from bankruptcy. Not all lenders use the same lending criteria; some may decline you but others may offer you credit at higher interest rates.

How to improve your credit record

While you cannot remove the listing from your credit record, you can work towards improving your credit profile. This could increase the chance of you being accepted for credit and that lenders and insurers offer you the best rates possible.

•    Apply for credit with lenders who are likely to approve your application.
•    Restrict the amount of new debt so that you will afford the repayments.
•    Make sure that your credit report does not reflect inaccuracies.
•    Consider putting a ‘notice of correction’ in your credit file. This note will explain why you got into debt.
•    Speak to credit counsellors about how to budget better.

Your credit record should improve after a few years, as long as you use credit wisely and do not end up with unaffordable levels of debt. Start small and make sure that you pay your balances on time.

What type of credit should discharged bankrupts get?

Get a credit card or a loan from companies that report your payment behaviour to the major credit agencies. Call the issuer to find out whether they send regular updates to the credit agencies before you apply.

Life after bankruptcy

Initially you may struggle but you should be able to learn a few important lessons – living within your means, how to budget, and the real value of money.

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Debt has been around since about 8000BCE; people have always wanted things they could not afford readily. Mesopotamians needed some sort of system to record their financial dealings, and for this they invented writing. You might feel tempted to infer that the concept of debt is a good one because of this.

Most financial planners will advise you to stay away from too much debt, yet other financial planners consider all debt to be bad. But few people have trust funds and most need some form of credit to get the things that they need the most, such as a mortgage for a home.

The credit system has also evolved over the millennia, thankfully lenders no longer sell defaulting debtors into slavery! It has become easier to get credit so consumers borrow, sometimes recklessly so. But it helps to know what kind of debt to avoid.

Good debt

Good debts should bring value, appreciate over time and increase our ability to earn money.

While it is true that individuals do things differently, most people do research before buying anything that requires long-term payment. Businesspeople create business plans and may not necessarily buy everything new as second-hand items will do the job as well.

Examples of good debt would include one of the following:

• A mortgage – this is one of the better debts as it allows you to have a home and the trend is for house values to increase over time, giving allowances for fluctuations in the housing market.

• Student loans – as this furthers your education which could lead to better job prospects and higher earning potential.
  Anything that can help to make money in the long-term

Bad debt

Bad debt does not appreciate over time, generally has high interest rates and consumers mostly use such debts to support their lifestyles.

Consumers generally overspend because they feel entitled to a better lifestyle or because they struggle to control their impulses. It could also be a combination of these two factors.

Examples of bad debt would include one of the following:

• Store cards – Tend to come with exceedingly high interest rates.

• Credit cards – Interest rates and charges makes it very difficult to repay your credit card debt.

• Debt consolidation loans that are not used correctly and therefore create even more debt.

• Micro-loans

• Overdraft

Debt that is neither good nor bad

• Car loans – unless the person buying the vehicle will use it to make money

These types of debt could be either good or bad, it depends on what the purpose is. Mortgages could also fall into this category – not everyone takes advantage of the fiscal benefits that mortgages offer.

And many more people take on ’starter debt’ to fund their new lifestyles after finishing college and starting their first jobs.

In conclusion, all debt has the possibility of becoming bad debt if you’re not careful. Borrow responsibly and make the most of your good debt.

No-one can give an exact description of the difference between a depression and recession, not even the IMF (The International Monetary Fund which is a private international organization that oversees the global financial system). There are many who have opinions but there is a lack of a single definition which will satisfy everyone.

It is easier to define a recession. A recession is, among other things, at least two successive quarters with lower production. Economic quarters last three months, i.e. there are four such quarters a year. Some characteristics are high levels of unemployment, a fall in wages, high inflation and fewer retail sales.

So what’s a definition that most can agree on?

•    A depression is a sustained, long downturn in one or more economies

Before the Great Depression we labeled all economic slumps as depressions. A decrease of an economy’s GDP of between 10 and 15% or more within one year. Some economists define depressions as periods that last about 36 months. This means depressions are equivalent – time wise, at least – to 6 recessions.

•    Recessions are not always bad

Most things in life have highs and lows. Some economists believe the economy is one such thing and that recessions are to be expected. There are different types of recession, too: some recessions are mild; others are more severe. The UK had five recessions since the Second World War: 1974, 1975, 1980, 1981 and 1991. It is difficult to recognise a recession while it is happening – economists normally only announce a recession after analyzing data from at least two economic quarters.

•    The Great Depression was two long periods

Most of us think the Great Depression of the 1930s was one long stretch of gloom. It was more than that. The depression lasted from 1929 until 1940 and had massive unemployment and falling stocks.

How do recessions turn into depressions?

Bank closures -  The government decides to close banks and other financial institutions. This means that if we want to avoid a depression, the government should keep banks open . Bail-outs can be good for us, even though we finance them.

Taxes increase - Back in the 1930s the US government increased revenue act tax rate to 63%. This was a bold step because it had been 25% before the increase.

Buy local only - While buying local is a good idea it should not be implemented in isolation; the world’s economy depends on international trade.

Economists have a new definition

The new distinction between a depression and a recession is the cause.

Recessions normally happen because of a severe monetary policy; depressions happen after an asset and credit bubble, a decline in granting credit and a lowering of the general price level.

Does this apply to 2008-9? Or do we have to wait and see what happens next year?

At its present state, many countries are being affected by the recession, some worse than others. Here is a list of countries that have been affected the most by the recession:

United States of America

Since the start of the recession in America, the most powerful country in the world has seen their banking system falter, the housing market crash, the level of unemployment increase and inflation rise. These are not great results for the biggest economy in the world.

Mexico

Being the neighbour of the most powerful country in the world is not easy, just ask Mexico who become vulnerable every time the economy of the United States suffers. Due to the current economic crisis, combined with little consumer credit and a slump in house prices, the Mexican residents are feeling the pinch of the recession. This could also affect tourism and the property market in the country.

Venezuela

Venezuela seemed to have escaped with recession so far with high oil prices and rich reserves. But this could come to an end if oil prices continue to drop, with the recession waiting to rear its ugly head.

Iceland

Iceland is one of the countries feeling the pressure of the recession in a big way. The Icelandic banking system is no longer trusted, and the economy is in a sad state of affairs. Inflation and interest rates is also rising at an alarming rate. It is so bad, in fact, that the Icelandic national currency, the krona, is worth not much more than the ever dropping Zimbabwe dollar.

Ireland

Ireland was one of the first countries in Europe to enter a recession. Their economy dropped by 0.3%, and continues to do so.

Spain

Spain officially entered recession in 2008, when the economy took a dip by 1%. This is Spain’s first recession in 15 years.

United Kingdom

Britain seems to be suffering the most from the recession, and it has been predicted that the country will only start seeing the light towards the end of 2009. In the mean time the economy is falling, having dropped by 0.5% between July and September in 2008.

Denmark

Denmark has been in recession for a while after an increase in food and fuel prices. Employment is also low, and labour productivity is falling, adding to inflation.

Germany

Germany has the largest economy in Europe, therefore a recession could cause unnecessary damage. Germany has been in recession since 2008, having suffered a 0.5% drop between July and September last year.

Italy

Italy has always had economic problems compared to the rest of Europe, brought on by huge public debt and low labour productivity. Last year this country entered recession.

Egypt

Egypt is a country which relies heavily on tourism and, with the recession, the travel and tourism industry has shown a decrease. Also, food prices are soaring in the country, which has resulted in 40% of the population living in poverty.

South Africa

South Africa is also feeling the effects of the recession with higher interest rates and banks tightening their belts on lending conditions. But hopefully, with the 2010 Football World Cup around the corner, investment in the country will grow, and there will also be a much needed tourism boost.

Japan

Japan has entered a recession after the economy was hit by weak exports and falling corporate investment. Japan, known as the second biggest economy after the United States, fell by 0.1% during the July-September period of 2008.

Australia

Some analysts predict the recession will affect Australia sooner rather than later.

New Zealand

New Zealand is suffering from its first recession since 1997. The current economic predictions have been the worst in over 20 years.

Developed countries beware; the world’s economy is heading towards a ‘deep recession’. This financial crisis has the ability to batter economic activity into submission. The International Monetary Fund (IMF) expects the world economy to shrink by at least 0.5%. The IMF released its twice-a-year World Economic Outlook report and things are looking bleak. This is in contrast with their optimistic thinking in the beginning of this year when they had announced that world output would increase by 0.5%.

In the report that the IMF had presented to the G20 (a group of finance ministers and central bank governors from 19 of the world’s largest national economies, plus the European Union), they forecast a shrinking world economy and that advanced economies will have declines of between 3% and 3.5% in 2009. The other predictions are that 2010 will see nearly no growth – 0% to -0.5%.

The G20 as a group is adding 1.8% of their GDP to boost their respective macro economies. The EU, however, is only contributing 1%.

The big fiscal stimulus packages that developed countries are implementing may not do much to boost their flagging economies. The UK’s financial deficit is the biggest among the G20 countries.

The financial crisis should be subdued

The IMF gave developed nations more warnings: their governments should intervene in the economies if they want to avert a bigger crisis. The recession will be worse and more prolonged if governments do not work towards stabilising their economies.

The IMF expects financial turmoil, negative incoming data, and lowered confidence if nothing is done to stabilise financial systems. The economy of Japan may lose the most this year – 5.8%, compared to the EU as a whole – 3.2% – and the US with 2.6%.

The ‘key priority’ is to restore lending but that can only happen if the financial system’s inefficiencies are eliminated.

The Eastern Europe challenge

The biggest challenge is that emerging markets may have restricted access to finance; banks and investors in rich countries could withdraw their money.

Eastern European countries fall into this category, especially the Baltic states: Hungary, Romania and Bulgaria. Emerging countries that rely on cross-border finance will be the hardest hit. Romania may receive a rescue package from the IMF sometime this year.

Countries that rely on manufacturing exports – East Asian countries may fall into this category – are also reeling from the decline in trade. Developing and emerging market countries may grow by 1.5% to 2.5%. These countries are suffering the biggest downward revisions.

Financial boosts to a limping economy

Many countries are trying to cure their banking sectors and they are also trying to boost spending. These two should help to boost the economic growth. The IMF recommended that the G20 countries spend 2% of their GDP on their fiscal stimulus programmes; G20 countries will spend 1.8%.

Fiscal expansion in 2009 will add a 2.4% boost to GDP and 2% to world growth. Depending on whether the IMF adds China and India’s figures to their calculations, we could see seven million new jobs this year.

The UK government planned a bail-out scheme late last year. Such schemes give or loan businesses money to prevent them from becoming bankrupt or liquidated. The government does this so that the public’s everyday life can continue as always. This is just one of the reasons for such bail-outs, however. The transport industry is one that the government considers necessary to all and may receive help more frequently.

So now there is a possibility of a second bail-out. There are a few things it will affect:

The economy won’t be the same again

The government hopes the bail-out package will stabilise the economy, increase consumers’ confidence in the economy and entice the banks to lend more. Certain people from the financial industry have been asking for this type of help since early last year; others think this may be the wrong thing to do. They believe that the government should tackle the real problem – banks’ unwillingness to lend during a period of negative growth.

We’ll still feel the crunch

We’re all hoping that the bail-out will get banks to feel more optimistic and lend to consumers again. The Council of Mortgage Lenders feels hopeful about the bail-out. Others are not as optimistic and predict more nationalisation of banks before the economy gets better.

Savers

Savings rates may stay as they are for now; however, the potential of lowering rates is there. This would be to counter the savings rates that have been kept high for too long.

Northern Rock

The bank was nationalised in 2008 and they were hoping to reduce the amount of loans by 60%. Other plans included fewer new loans and encouraging mortgage customers to switch their mortgages to other lenders after the fixed introductory period expires.

Northern Rock had a referral deal with Lloyds TSB and gave borrowers access to brokers who could help with remortgages at other institutions. All these measures were part of their agreement with the government.

Royal Bank of Scotland

The government now owns 70% of RBS. Their deal with the government is to increase the amount of mortgages and loans to businesses. The goal is to increase its current lending by more than £6 billion.

Your mortgage may become cheaper now, and people who do not have access to a large deposit may find it easier to get a mortgage.

This year we could have 150,000 people (pdf) declaring themselves insolvent in England and Wales, according to Government’s Insolvency Service. This personal insolvency will either be in the form of bankruptcy or an Individual Voluntary Arrangement (IVA).

The numbers for last year were lower – 104,573 and 2004 had the lowest amount of bankruptcies and individual voluntary arrangements – 46,650.

People who have limited financial knowledge and even fewer resources, are most vulnerable: they are in debt but are forced to spend on credit to see to their everyday needs.

Our debt is reaching high levels

KPMG, one of the largest professional services, recently conducted research revealing creditors may have wrote off more than £1.1bn in 2008. The average IVA proposes to repay £18,164, which is a 38 per cent debt repayment of the average debt of £47,800.

There is a slight difference between these new figures and the figures from 2007. Most of these debts are from credit cards and loans that pay for day-to-day expenses. KPMG estimates that about 2,500 people received IVA agreements in 2008 despite their debt exceeding £100,000.

KPMG’s director of personal insolvency, Mark Sands, said that many people are unable to make repayments on their debt; the amount of money they owe is just too big. He also said that formal

New plan to help debtors

The government will introduce Debt Relief Orders in April 2009. These should benefit debtors who have debts of less than £15,000 and who have few assets to avoid bankruptcy.

Become better at your job, in fact, try to become indispensable. This could help if your employer decides to start making redundancies. You can’t afford to be without a job during this bad phase in the economy.

Complete your degree if you haven’t already done so. One of the best investments is in you, so consider investing more into your education.

Take steps to reduce your debt. These steps needn’t consume your entire paycheck. You could start with the smallest debt and work your way up or tackle the one with the highest APR first. Get into the habit of writing down everything that you buy and make sure that these support your goals.

What are your goals? Think of a few that you wish to achieve this year. Write them down and think about them every day but make sure they are measurable. For example, you could make saving for house deposit as one such goal. And can track how much you have progressed with an Excel spreadsheet.

Why buy new things when you can use what you have? You can apply this to clothing, vehicles, electrical appliances and gadgets. You don’t need to buy the newest iPod nor do you need to buy a new laptop every two years. Try to go without buying the newest and brightest and learn to be content with, and enjoy what you have.

Are your savings healthy, or are they languishing in some forgotten account? Your savings should do the hard work, especially if you’re still young. Invest a little time to learn more about the stock market and other investment options. See a financial advisor who can give you unbiased advice. Make your money work hard so that you will be able to retire in comfort.

There are a few saving types you may need. Two of these are a retirement account and an emergency fund. Your retirement account will be used when you reach retirement age; your emergency fund will be used when you need money unexpectedly. This will save you from taking out loans and it’ll also save you the worry of not knowing where to get the money you need so desperately.

How much entertainment do you need? Do you need unlimited broadband, a cable television subscription and a DVD rental account? Perhaps you could eat out a few times less or switch to a cheaper television subscription. There might be more things that you can live without. Find them and save that money, or put it towards your debts.

What bank charges are you paying? Do you budget for these charges, or do you forget that they exist? Make sure that you are not paying too much for the privilege of banking. You could negotiate some of the charges with your bank. You could swap to a different bank if your bank is unwilling to lower certain fees.

Make a list of all the things you need to pay this year: utility bills, insurance, monthly debit orders, and subscriptions. Think of ways to save money on electricity and water. Try to reduce the amount of monthly debit orders by paying the full yearly fee instead, if your finances allow.

1. Use your savings

Having debt and saving at the same time only works when your savings earn you a better after-tax return. This rarely happens, though. Offset mortgages, which use savings to reduce the mortgage amount, may cost more long-term: there are cheaper deals available on other types of mortgages.

2. Speed up your repayments

Debt costs less if you make bigger regular payments towards it. Making the minimum repayment on credit cards does not help to reduce debt. Instead, make bigger payments, as much as you can afford. Over payments on personal loans may not be possible. Try instead to save money into a separate account such as a cash Isa. Once you have saved enough into this account you can then pay off the personal loan with one payment.

3. Control your spending

Try not to live beyond your means. Living an expensive life means using your overdraft every month and surviving on other forms of credit. Keep a daily record of your spending to help you to find out where your money goes. Try to think whether you need a new item before you buy it. Non-essential spending should be at a minimum and extra money should go towards clearing your debt. Cheaper brands mostly provide the same value as branded ones, so try to stick to these where possible. Paying in cash will prevent you from slipping into too much debt.

4. Draw up a budget

Monthly budgets can help you to keep control of your finances. You can also use budgets to see where you have gone wrong, and use that information to change your habits and make cutbacks on spending.

5. Switch credit cards

You want to clear the outstanding balances on your credit cards but the interest charges are holding you back. There are cards that offer a 0 per cent introductory rate for the first six months: Virgin Money, Nationwide and Tesco, among others. This will help to reduce your credit card balance, if done properly.

6. Switch to a better bank

Some overdrafts have high interest charges: 10 per cent or more. If you are paying this much and are spending most of the time in the red, you should consider switching to a different bank. Being in debt does not mean you should stay with the bank until everything is paid up.

7. Switch energy and phone companies

Check on a website such as www.uswitch.co.uk to see which providers are the cheapest in your area. Switching could save you money, depending on your current usage. Pay-as-you-go might work well for someone who has high mobile bills. Set a limit and stick to this sum each month – it’ll cut out all those high mobile charges.

8. Increase your income

Extra income always comes in handy. Try to get a part-time job or let out a spare room to a lodger. Rental income is tax-free until £4,250 a year.

9. Sell your possessions

There is almost always someone who is willing to pay money for your old things. You could auction things on www.ebay.co.uk or rent a pitch at a local car boot sale.

10. Move in with relatives

Not such a bad idea when you’re struggling with debt. If none of your other debt solutions work out, you could move back with your parents or with another relative who wouldn’t mind having you around.