More consumers are in financial trouble than before, buried up to their necks in unpaid bills.

Personal debt has reached an amazing £1 trillion in Britain, triggering a Parliamentary initiative for a new bankruptcy law. Tens of thousands, not only in Britain but the United States and Canada as well, are faced with the harrowing prospect of losing their homes and possessions overnight.

According to the British Department of Trade and Industry figures, the number of individuals in serious financial trouble shot up by 73% within the last year. Orders to repossess property went up by 57% in a year and have reached 22,997, according to The Times of London.

Paul Bannister, writing for bankrate.com, reports that “some 1.6 million U.S. households -- one of every 73 -- filed for bankruptcy in 2003.”

Such amounting debt takes its toll on relations, of course. There are more families and couples splitting apart due to financial woes than any other reason. A USA TODAY survey revealed that “two of the five couples” that the daily chose to study for a series on personal debt have actually “split up a few weeks later” due to money problems.

Those with mountains of debt should watch out for equity line of credits that a lot people resort to for a quick fix. Especially with adjustable rate loans, the consumers are taking a big risk of getting caught in a jam in this day and age of rising interest rates.

A Toronto Sun article penned by Linda Leatherdale outlined the problem with line of credit, especially when you don’t clear out your debt on a monthly basis.

A $30,000 credit card debt, for example, will cost you $5,700 a year at 19% interest.

It is true that you can pull that debt down to just $1,500 a year by charging it on your home equity line of credit.

However, Leatherdale warns, “a line of credit can go on forever, and if you only make the minimum payments, the loan will cost you more than any credit card.”

So what’s a good rule of thumb to say out of trouble?

Kathy Chu, writing for USA TODAY, suggested the following: “The general wisdom is that your housing expenses, such as rent, mortgage payments, property insurance and property tax should not exceed 28 percent of your gross income. These costs and other debt payments -- such as credit cards -- should be no more than 36 percent of income.”

Another good advice that was true yesterday, is true today and will be so tomorrow is “pay cash whenever you can.” You will never go wrong with not spending what you don’t have and perhaps would never need another rule of thumb either.

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