Debt Management Plans

Another debt solution available in the UK to those who are unable to pay back their debts, is a debt management plan. This is a relatively informal debt solution, to be completely honest. While this has its benefits in the fact that it can often be easier to enter into, it does mean that none of your creditors are legally obliged to accept its terms.

In essence, a debt management plan is an informal arrangement between yourself and your creditors to repay debts owed. In most cases, a debtor approaches a debt management company to deal with the negotiations. There is a benefit in this, as creditors are simply often more likely to take notice of offers made by companies. Although, there is no harm whatsoever in approaching your creditors independently to try your luck.

What a debt management company would do, is take from you a detailed account of your income and expenses. They would use this to determine how much each month, after your living expenses have been deducted from your income, you can realistically afford to pay off your debts. They would then take this information and approach your creditors with it. If your creditors agree to the offer on the table, often involving you paying back less than you actually owe, then you simply make one payment each month to your debt management company, who then divides this accordingly between your creditors. The debt management plan lasts for a set period of time, often five years. At the end of this time, your debts are considered to be settled. Because this is an informal agreement, however, you can actually cancel it at any time you like - but so can your creditors. It will also probably show on your credit record.

There are an estimated 100000 debt management plans agreed each year in the UK at the moment. Most companies DO NOT charge for this service, so if you approach one who wants to charge you, I would recommend trying another. Often, this will only be available to you if your debts do not exceed £15000, although given the informality of this type of plan, this varies. They are aimed at those who have an income, who can afford to make a payment of some sort each month but who cannot afford what they are currently paying out.