Debts can be written off by debt charities

According to a recent report debt charities and firms that deal with debt management plans and similar solutions for those struggling with debts are to get new powers that will enable them to write off a portion of the debt owed by the client if deemed appropriate, even if the creditors do not agree with the write off.

Under new regulations that are to be brought in these charities and agencies will have the power to write off some of the debt, and will also be able to enforce a debt management plan structure despite when the creditor thinks.

Also, as part of the regulations, lenders will not be able to petition for bankruptcy against clients that are with these firms, and energy firms will not be able to cut off supplies.

At present it is thought that around seventy thousand people are in debt management plans having fallen into difficulties with keeping up with repayments on their unsecured debts.

The plans involve making structured set payments to the charity or debt firm, and these are distributed amongst the creditors on a pro-rata basis.

Officials from the Justice Ministry said: ‘Such schemes depend on the voluntary participation of the debtor and creditors and operate without any form of regulation.’

They added: ‘There is currently no power to compel creditors to adhere to the terms of a debt repayment plan.’ It also said that debt companies and charities would be able ‘to write off a proportion of the debts where a debtor complies with a plan, but cannot repay the full amount in reasonable time.’