DebtOptions

What is a Debt Management Plan?

A Debt Management Plan is an informal agreement between you and your creditors to repay a proportion of your debts over a certain period with a set monthly payment. For example, you might propose to pay back 60% of the total owed, at a rate of £90 per month.

Who are Debt Management Plans suitable for?

A Debt Management Plan might be appropriate if you:

• have unsecured loans on which you can no longer make repayments
• expect a change in circumstances that might mean you could not repay your debts
• have very little disposable income left to repay debts, once your essential living expenses have been paid from your income
• owe money to just one or two creditors (you must owe at least three creditors in order to qualify for an IVA)
• wish to keep your debts private and not reveal them to family, friends or colleagues wish to avoid dealing with your creditors directly.

Why would I opt for a Debt Management Plan?

• Debt Management Plans can be very quick and easy to set up, because they are not legal agreements.
• Debt Management Plans can be set up to suit your personal circumstances. There are no restrictions in terms of the duration of the arrangement or the amount that you pay back.
• If you use a third-party provider to manage your Debt Management Plan, you make one simple payment to them and they distribute the money as required to your creditors. This makes is easy and simple to work out your monthly budget going forward.
• Debt Management Plans are much less intrusive than an IVA or bankruptcy. As long as you can make the payments required by your Plan, there will be no in-depth scrutiny of your finances or analysis of what you can afford to pay.

How do I get a Debt Management Plan?

Although it is possible to set up a Debt Management Plan yourself, it is usually much better to ask an expert third party such as Debt Options to set up a Debt Management Plan on your behalf. Using a third party saves the hassle and potential distress of dealing direct with your creditors, plus you can tap into all the experience and expertise that established debt advisors can offer, making the whole process much quicker and easier.

Is a Debt Management Plan a legal arrangement, like an IVA?

No. Debt Management Plans are completely different from IVAs. While both types of arrangement involve making a commitment to pay back what you owe on a regular basis, an IVA is a legally binding contract while a Debt Management Plan is an informal arrangement between you and your creditors. Since Debt Management Plans are not official or legal arrangements, there is no obligation for your creditors to accept them – or even acknowledge them. They are also free to increase their demands on you at any time.

Debt Management Plan Disadvantages

Entering into a Debt Management Plan can affect your credit rating in the medium to long term.

Repaying your debt over a longer period of time will increase the amount you have to pay back.

A debt management company charges fees to manage your plan.

Although all debts will be taken into account when your financial statement is produced, debt management companies will only manage your non-priority debts such as credit cards, unsecured credit and store credits.

Debts such as rent and utility bills will still have to be managed by you.