Debt Management

For all debt management questions contact our debt team for advice and help who offer free, no obligation solutions.

A debt management programme is an unofficial way of communicating, between yourself and your creditors, regarding lower payments.

The advantages of debt management are:

• You only make one monthly payment and this is split between all your debts.
• All contact between creditors and yourself is handled by the debt management company.
• You pay an amount that you can realistically afford but if your circumstances change this can be adjusted.
• You will not receive any late payment fees because all transactions go through the debt management programme, and they may be able to adjust or stop any interest on your debts.
• Ideal for people with with debts of less than £15,000

Bad debt levels in the UK are higher than ever these days, and recently broke through the £100,000 barrier for the first time. An increasing number of consumers in the UK are finding it a real struggle to keep up with repayments on their unsecured financial commitments, and this is resulting in missed payments, late payments, charged being incurred, and adverse information on credit reports.

Far too many consumers in the UK tend to bury their head in the sand when financial problems arise, but it is important to realize that this will only make the situation worse. It is important for consumers in the UK to learn about the different options available to them if they are struggling to repay their unsecured debts.

One thing to remember is that if you are struggling with your debts and you have both secured and unsecured finance, you should always continue to pay your secured loans as a priority, as otherwise you will end up losing the asset against which the finance is secured, which for most people is their home.

Another thing to bear in mind is that there are now many fee-free debt advice agencies and charities in the UK, as well as the Citizen’s Advice Bureau, all of which will be able to offer advice on your options based upon your circumstances.

An informal agreement with creditors could be one option for those with unsecured debts. This is where each of the creditors is written to, either by the consumer or by a debt advice/consumer counselling agency, with a proposal for a more affordable monthly repayment.

You will need to be able to offer a realistic amount each month, and if the creditor agrees to this the proposed sum will become your new monthly repayment. This means, of course, that you will be repaying the debt for a longer period but at a more affordable amount.

An official repayment plan is another option for those that can only afford to make minimal repayments to creditors. A debt management agency can help to set these plans up with creditors, and there are fee-free agencies in operation, which means that all of the payments that you make will go to your creditors rather than on commissions and fees to the agency. With this type of plan the agency contacts your creditors with a proposed repayments based in your income and the amount that you owe.

The agency will work out what your disposable income is each month, and will then make a repayment proposal on a pro-rata basis based upon how much you owe each creditor. You then make a single monthly payment to the agency, and this will then be distributed amongst your creditors based upon the proposed amounts. Again, this will increase the time it takes to repay the debt, but these agencies can often get creditors to freeze interest and charges to stop the debt from getting any worse.

Another option that is increasing in popularity is an IVA. This stands for Individual Voluntary Arrangement and is an official agreement between the consumer and the creditors. There must be a majority agreement from your creditors for an IVA to actually go ahead, and there are also other eligibility requirements involved – for instance, you must be in full time employment, and you must owe at least £15,000 collectively in unsecured loans and credit.

If accepted, an IVA means that you will make reduced repayments on each debt based on what is agreed with the creditor, and you will continue to make these repayments each month for five years. After the five year period any remaining balance on each debt is written off and your repayments will cease.

IVAs have become a popular alternative to bankruptcy, with fewer long term consequences and less stigma attached to them. Bankruptcy is an option that should only be considered as a last resort because of the consequences attached. However, even with an IVA consumers should weigh up the pros and cons before make a firm decision to go ahead, as these can affect your credit and financial future for a considerable length of time.