subject: Debt Management Plans - Get Help With Debt Problems [print this page] Only a few years ago, the media was full of advertisements for secured loan providers who were offering borrowers with several debts the chance to consolidate all their borrowing into one loan. But the 2008 credit crunch has dramatically reduced the availability of credit, and more and more people are looking to debt management plans in order to manage debt repayments.
If you feel you are struggling with your debts, a number of companies exist who seek to provide help with debt payments by providing 'debt management plans'. These companies are experienced in advising people in debt, and have typically built strong relationships with creditor companies. Many people who have taken out debt management arrangements have found that their outgoings have reduced dramatically.
A debt management consultant will work with you to identify your income and essential outgoings, and agree an affordable amount per month that can be set aside for debt repayments. The consultant will then negotiate with your creditors to persuade them to accept your debt management plan - this is where the debt management companies' strong relationships with lenders are particularly valuable.
Once agreed, the single monthly payment will be made to the debt management company, who will then distribute the funds as appropriate amongst your creditors. The debt management company will also handle any enquiries or demands made of you by the creditor companies.
It is vitally important that you inform your debt manager straightaway should your financial circumstances change, as it is possible for the monthly payment amount to be reduced or increased.
Debt management plans have provided valuable assistance to many people seeking to manage large debts, or indeed smaller debt amounts. But it must be acknowledged that a debt management plan will typically involve the debts being repaid over a longer period, which could increase the total repayments. Taking out one of these plans could also affect your ability to obtain credit in the future. And it should be noted that debt management companies charge fees for their services.
Debt management plans cannot be used for mortgages and other secured borrowing.
Debt management companies in the United Kingdom must be licensed by the Office of Fair Trading (OFT), and comply with the requirements of the Consumer Credit Act 1974 and with additional guidelines issued by the OFT. The OFT carried out a compliance review of the debt management sector in 2010, which resulted in 87 firms ceasing to carry out this type of business, either forced out by the OFT or voluntarily exiting the sector. Another 67 firms were issued with warning letters.
Debt management companies who are members of the trade association the Debt Managers Standards Association (DEMSA) must also comply with the requirements of the DEMSA Code of Conduct.
