Debt Management for Debt Problems
A Debt Management Plan is a debt solution which enables you to
make an affordable monthly payment to your creditors via a debt
management company. A Debt Management Plan means you only have to
make one monthly payment to one company, who will distribute the
money on your behalf. Your debt management plan will last until all
of your debt is repaid.
People living in Scotland may wish to consider the Debt Arrangement
Scheme as it offers legal protection and is a similar solution
to Debt Management Plan.
Benefits of a Debt Management
Plan
- You will pay a monthly manageable sum to one company and they
will distribute the money to your creditors
- You may be able to get your interest and charges frozen
- A Debt Management Plan is an informal solution which means you
are not tied in legally to the solution - you can usually leave a
Debt Management Plan with a month's notice
- You can increase or decrease payments if your salary
changes
- You will be taking action to repay your debt and will be on the
way to becoming free of your debt
Negatives of a Debt Management
Plan
- Your creditors do not have to accept your proposal
- Any spare income will be used towards the debt solution meaning
you won't have much disposable income
- You have to repay all of the money you owe - you can't get any
written off
- If you owe more than £10,000 and it will take you longer than 7
years to clear your debt then a Debt Management Plan may not be the
best solution for you
- Some Debt Management companies will charge a fee for
administering your case, however we can point you in the direction
of free Debt Management Plans, if that is the best solution for
you
- Freezing interest and charges is not guaranteed and court
action may continue
- Repaying small amounts over a longer time may lead to an
increase in the total debt to be repaid
- Your credit rating will be affected for 6 years
Please note that only unsecured debt is included in a debt
management plan so you may not be debt free at the end of the plan
if you have a mortgage. You must also ensure you continue to pay
priority debts such as rent and utility bills.
A for profit debt management company will charge you a fee for
administering your case. A charity providing debt management
plans will not charge you for the solution. Check our debt management
calculator today to see how much longer a for profit debt
management plan would take, and how much the for-profit company
would take in fees. Use our debt management
calculator now.
Criteria to enter a Debt Management
Plan
- You must have at least two
different creditors
- You must have unsecured debt of at
least £5,000
- You must have a disposable income
of £100 or above each month
Who can enter a debt management plan?
To enter a debt management plan you must have a disposable
income over £100 a month, unsecured debt of £5,000 and above and
has two or more different creditors.
What is a debt management plan?
A debt management plan is an informal agreement between you and
your creditors where you agree to make a monthly contribution from
your income towards your debts. Instead of having to pay several
different creditors you would make the payment to one company who
would distribute the funds to your creditors on your behalf.
Do my creditors have to accept my debt management plan?
Your creditors do not have to accept your debt management
proposal. If a creditor did not accept the proposal then you could
decide if you want to continue with the debt management plan,
excluding the objecting creditor, or cancel the plan. If you were
to proceed with the debt management plan excluding the creditor who
objected you would have to continue to make payments to them
yourself.
Is my interest and charges guaranteed to be frozen?
Only your creditors can agree to freeze your interest and
charges. A debt management company will attempt to get your
interest and charges frozen to enable you to effectively repay your
debt.
As the solution is informal your creditors can start or stop
your charges and interest at any time.
Can I cancel my debt management plan?
As a Debt Management Plan is an informal arrangement you can
cancel the agreement, usually with 1 months notice but your
creditors may revoke any agreement to reduce/freeze interest,
therefore increasing the amount you owe.