New research from the Insolvency Service reveals that more people aged between 25 and 34 are turning to Debt Relief Orders to deal with their debt problems than any other age group within the population.
A Debt Relief Order (DRO) is a formal insolvency procedure aimed at people who cannot pay their debts. It is available to those with a low income, no other access to debt relief and no prospect of their situation improving.
In order to qualify, you must have assets of £300 or less, and your debts must be no more than £15,000.
Joanna Elson, Chief Executive of the Money Advice Trust said: "Many struggling 25-34 year-olds might have expected to be further up the financial ladder by now. At the same age their parents would most likely have bought their first home, have a comfortable pension lined up, and be saving for the future. For today's 25-34 year-olds the picture is much bleaker."
And it's not just young people who have money problems. Over 15 million Brits worry about their finances every single day, more than other issues such as health, jobs and relationships, according to research from MoneySupermarket.com. An overwhelming 76% of people think their financial stresses will get worse in 2012.
Here, we take a look at what your options are if you are struggling with debts and where you can find help...
Don't suffer in silence
If the bills are mounting up and your debts are starting to control you rather than the other way round, talk to your creditors as soon as possible. Let them know you are having problems paying and you may be able to negotiate a repayment plan that will enable you to pay back what you owe more slowly.
Make sure you prioritise your debts too, with those that could affect the roof over your head, such as your mortgage and council tax payments, taking priority. Don't be tempted to take on more debts to pay off what you owe as this will only lead you into deeper financial water.
Think about consolidating debts
If you would prefer to make one payment each month rather than several, you may want to consider consolidating your debts through a low cost loan.
However, remember that only those with an excellent credit rating will qualify for the most competitive loan rates, so if you have already missed some of your debt repayments this won't be an option.
The best loan rates are currently available on loans between £7,500 up to £15,000. For example, Nationwide Building Society is offering a representative annual percentage rate (APR) of just 6.4% fixed on loans of this size, or a lower rate of 6.3% if you are an existing FlexAccount customer.
Other competitive deals include Tesco Bank's personal loan, again at a representative rate of 6.4% fixed on loans between £7,500 up to £15,000, and Marks & Spencer Money's personal loan, also a representative rate of 6.4%.
Cut credit card costs
If most of the debts you've run up are on credit cards, then you should look to reduce the amount of interest you are paying as soon as possible.
There are plenty of credit cards currently available which offer lengthy 0% introductory periods on balance transfers. For example, Barclaycard's Platinum with Longest Balance Transfer card offers 24 months at 0%, although there is a 3.2% transfer fee.
Alternatively, the Barclaycard Platinum credit card with extended balance transfer offers 22 months at 0%.This card has a balance transfer fee of 2.90%.
After the 0% introductory periods end, both Barclaycards have a representative APR of 17.9%. If you do move your debts to a balance transfer card, make sure you pay off what you owe within the introductory period and don't be tempted to use the card for new spending.
If you still can't manage your debts
If you have tried talking to creditors and looked at the various ways to take control of your finances, but you are still drowning in debt, then seek professional help as soon as possible.
Debt advice charities such as the Consumer Credit Counselling Service or Money Advice Trust provide help and advice free of charge. Alternatively, contact your local Citizen's Advice Bureau.
Gillian Guy, chief executive of Citizens Advice, said: "After Christmas, Citizens Advice Bureaux see more and more people coming to us in debt and having problems making ends meet to cover even essential household bills.
"While money problems don't go away by themselves, the good news is that free help is available. Trained advisers can help you prioritise your debts, negotiate with creditors and provide advice on a range of debt remedies so you can find an option that is right for you. If you are worried about your finances, don't delay, get help."
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