Between May and July unemployment in the UK rose by 80,000. With unemployment set to rise still further we ask what options you have if you are unemployed and have debt which you are struggling to pay.

The latest government figures showed that unemployment in the UK is rising at its fastest pace for two years. Between May and July this year the number of people who became unemployed rose by 80,000 to a total of 2.51 million.

Because relatively few people have any particular savings to fall back on, becoming unemployed and suffering a fall in personal income can often lead to real problems with debt repayment.

However by following some simple guidelines it is possible to stop your debts from getting out of control if you become unemployed

Avoid borrowing more

If you are made redundant and left with insufficient income to pay your debt your first reaction may be to consider borrowing more to tide you over.

However you should think carefully before borrowing more money. This solution will only work if you are confident that you will be able to get a new job relatively quickly.

If you are supporting your living expenses and debt repayments by using your credit card or bank overdraft facility, you will see that the amounts you owe start to increase extremely quickly.

If you don’t believe that you will be able to secure new employment quickly or the job that you are likely to get will pay significantly less then you should try not to borrow more. Instead it is sensible to consider a debt solution which will help you reduce the payments you make towards your debts.

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Consider a Debt Management Plan

If you need to reduce the amount that you pay towards your debts because you have become unemployed or have been forced to take a new job which pays less you should consider the possibility of using a debt management solution.

If you are still able to make payments towards your creditors you might be able to start a Debt Management Plan (DMP). This will allow you to reduce the amount you pay towards your debts to an amount that you can afford until you have found a new job and can start to pay more again.

If you are unable to make any further payments towards your debts and you have no idea when you might be able to find a new job then the alternative solution to consider is Bankruptcy.

Although it sounds bad this solution can be an ideal way of solving a debt problem if you are renting your home or you are a home owner with no equity in your property. It can be implemented very quickly and will take away the pressure of having to try to keep up with your debts immediately if your income has really fallen.

Settle you debts with redundancy money

If you become unemployed and are paid some redundancy money, you might be able to use this to settle your debts with a lump sum payment.

Clearly you may need some or all of your redundancy money to live on while you look for a new job. However, acting quickly and using some of your money to settle debt before it is at risk of being spent could be a really good way of clearing debt that you have.

Offering a lump sum settlement can be particularly useful if you do not know when you will find a new job or you are only likely to find a lower paid position.

You could use your redundancy money to carry out a full and final settlement IVA which would make the settlement legally binding on all of your creditors.

By doing this you may find that the limited money you have available goes further than if you tried to negotiate with each creditor individually yourself.

Unemployment likely to keep rising

Given the current state of the UK economy, it seems likely that businesses and employers will remain under financial pressure for some time to come. The full affect of the government cuts on employment are now also starting to be felt.

As such, it is reasonable to assume that the number of people facing unemployment will continue to rise in the foreseeable future.

It is therefore more important than ever to plan for a period of unemployment by trying to get some savings together. If you have savings to fall back on you may well be able to avoid having to use any kind of debt solution.

However, if you do find that you lose your job and are struggling with debt repayments, you should start thinking about your options and the possibility of using a debt solution straight away before your debts have time to get out of control.