The recession is biting harder than ever. Ever since sub-prime lending in the USA kicked off a wave of mortgage defaults, the banking system came close to collapse and personal debt levels hit the roof, consumers have found themselves struggling with a toxic mixture of high inflation, low interest rates on savings, expensive debts and high unemployment. For many people, reducing personal debt is now a key priority. With cheap credit long-gone, the focus is on clearing credit and store card balances, personal loans and repaying mortgages. For some people, this is simply to take basic precautionary measures against the threat of ongoing hard times. For others, the financial situation has become intolerable and many are on the brink of bankruptcy.

This means that personal debt reduction is now a hot topic. The days of cheap, easily available credit are passed and focus now rests on clearing credit card balances, personal loans and reducing mortgage balances. For some, these actions are to provide a simple safety cushion against further blows. For others, the situation is more severe and the prospect of defaulting on loans, is fast becoming a worrying reality.

This has led to a wave of bankruptcy in the UK, which was once seen as something shameful by the public. Perceptions are now changing however, linked in part to the wave of agencies and visible businesses offering high street debt management solutions to the struggling public. These services include bankruptcy, debt management and debt consolidation services. Some of these businesses are private ventures – others are government sponsored – and it is this latter category that those seeking help should turn to for independent, impartial and reliable advice. Some commercial debt management and debt consolidation providers will charge high fees and offer non-impartial, biased advice towards their products. This can lead to clients finding themselves tied into equally punitive restructured debt repayment plans over longer periods of time. Look for a good agency by finding government accreditations, recommendations, Chamber of Commerce membership, or other business associations. The citizen's advice bureau is an ideal place to start.

A professional debt advisor will begin any client query by assessing personal circumstances and the extent of the problem. Struggling customers will find several solutions available to management debt. For some, bankruptcy can be an effective solution. It does offer the advantage of entirely clearing debts once discharged and it removes the risk of being contacted by creditors. Those who are going down the bankruptcy route for the first occasion may also find their liability can be discharged within a year and they can keep their home if renting. However, for those with assets
- high value cars and even a family home may be forfeited and bankruptcy status must be declared when applying for new credit. Also, some professions will not accept employees with a bankruptcy record – this includes education, some legal professions, education management, accountancy and public services. The status will also limit a person's ability to set up new businesses or sit on a company board.

Those claiming bankruptcy for a first time may also be discharged from their liability within a year, you can keep a low value car, rebuild your credit rating post discharge and if you rent, you won't lose your home. However, you'll lose control – and even possession of assets such as savings, high-value car and your home. You have to declare your bankrupt status when applying for credit and it can affect your employability – certain professions such as finance, education, public services and accountancy will not accept employees with a history of bankruptcy and the status will affect your ability to sit on company boards or set up new companies.

Debt management schemes such as IVAs are strong alternatives, but again with pros and cons. Essentially, an IVA allows a client to consolidate debts into a pre-agreed and affordable repayment sum each month, based on their budget and circumstances. The IVA is usually fixed over five years and repayments can be from around 250 a month. After the period is completed, any remaining debts are cleared (up to 75%) and the customer is debt free. Advantages of an IVA are that interest owed to creditors is fixed, the overall amount owed and repaid is cut, creditors are prevented from taking legal action against the customer and unlike a bankruptcy, it's a private agreement and not publicly advertised. This also means that it doesn't affect professional status – customers can still continue to trade as accountants, solicitors or directors and they don't need to forfeit assets such as a car or house. The IVA is also managed by a licensed practitioner. There are, as with anything, disadvantages too however and these include a difficulty with obtaining future credit, bankruptcy if the IVA fails and a longer period of repayment than with a bankruptcy. The scheme is also only suitable for debts over 12k and the client must be able to make monthly repayments. The overall repayment amount will also be more than with bankruptcy and it must include all creditors.

Other debt management approaches include debt consolidation – popular with those with smaller debts, who haven't yet fallen into significant problems, but who wish to rationalise their number of debts and put them all under one low repayment. There are companies offering debt consolidation services that will package existing liabilities and take on the debt themselves with the customer – but proceed with caution as the ultimate repayment sum may eventually be longer and the repayment terms greatly extended. Many customers opt for their own debt consolidation approach by taking out 0% or low 'life of balance' credit cards which allow balance transfers from existing cards. This offers the same benefit – a lower cost, single monthly repayment, without third party agency fees.

Before engaging in any of these options however, particularly bankruptcy, it's vital to get quality advice from the start, ideally from a scheme or agency that is impartial and government funded – a debt charity for example. Also manage the basics to tackle problems early on, before they grow – creating a personal budget, exercising discipline on spending habits, downgrading on brand purchases to 'value' ranges and looking at ways to earn additional income. Early intervention can tackle debt problems before they escalate into something serious – and avoid professional input altogether.

Learn more about debt consolidation. Stop by Lucas Mars's site where you can find out all about bankruptcy and how it can affect you.