Can a debt management plan save your home?

Falling behind on your loans can create a gut wrenching situation.  Some symptoms of overdue payments includes breaking into a sweat when you pick up the mail, refusing to open reminders from creditors, refusing to answer the phone, lying about your name when asked by a telephone operator, or by a stranger on the street.

It also includes deceiving your spouse and family. Most people manage to make these tactics work, at least until the bailiff or court agent arrives at the door to repossess the computer, television, or the automobile.  There is no downplaying this situation. It is hell on earth. 

There is more to lose than your possessions and home.  You can lose your self-esteem, family, marriage, and even your job. 

The frustrating fact of debt is that many people did not overspend, borrow too much, or fall into financial difficulties.  There are other ways to end up in debt.

One fast growing method of finding yourself facing court action is by separating.  Many single women are finding that their share of the household debt which averages  ₤20 000 may not have been serious when they lived in a two income family.  However, now it is an insurmountable debt mountain which makes life miserable for both them and their children.

Interest rates and inflation are also driving some cautious borrowers, and financially responsible people, into the debt trap.  The elderly are also hit hard by inflation and interest.  Utility bills and increasing council taxes are also to blame for many people’s problems.

Most people manage their debts, trying to struggle through them, until they risk loosing their home. This is often a case of ‘too little to late’ but for a lucky few, it can offer hope.

Debt Management Help

A debt management plan is similar to a budget. It estimates the monthly debts for a year, and the income, and then tries to create a balance. Many people struggle under their Do-It-Yourself debt management programs.  Some succeed and other fail.  The smart ones go to a debt counsellor and learn a few tricks of the trade that will save them money, and pay their debts faster.

Do not overlook the free debt management services offered by the government or by debt charities like Citizens Advice. These people are experts and can teach you a few tricks.

Find Your Money

One of the first things a debt management counsellor will help you do is find money that is owed to you.  There are dozens of programs that offer money to people in need.  Most people overlook these programs because they believe that they are only for the impoverished or people suffering disabilities. This is a myth.

Save Your Money

Millions of dollars in extra taxes are paid each your by people who complete their own tax forms.  It can be expensive to hire a tax preparation agent.  However, it will only cost a few pounds to have them look over your last 3 tax returns and find out if there is money owed you.

Debt Management Charities

If you want to use one of the debt management charities like Consumer Credit Counselling Service, Citizens Advice or PayPlan, then you can make one payment to them each month, and they will pay the creditors.  They can also help you set up ‘pro-rata’ payments with debtors. 

The pro-rata payments may not be as affordable as a debt consolidation loan, but they will break your payments into manageable sections.  Some debtors may even allow you to put off payments for a few months.

Remember, the banks are accustomed to working with these charities. They have more power than you  do, and best of all, they are free.

How to Make Payments

People make their first mistake when debts start to accumulate.  They repay the lowest debt first. This is a major mistake that will eventually lead to bankruptcy court. Instead you need to ‘Snowball’ payments. This means to pay off the most expensive debt first.

Long Term

Take it for granted that a debt management plan is long-term. In fact, it should be seen as a restructuring of your finances that will teach you a new way to manage money.  Most plans will average five years,  and take it for granted that you will stop using your credit cards and store cards, and will refrain from borrowing another loan.

Most people fail because they get half way and then start to spend again.  This angers creditors who expect that any extra money you have will come to them, and you won’t add to your credit card debt.

Purpose of a Debt Management Plan

The purpose of a debt management plan is two fold.  First, it will reduce your debts so that you can avoid bankruptcy. The second is to teach a new method of money management that will help you stay out of debt, and avoid the fear of ever seeing a collection letter in your mailbox again.