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Debt Management Plans - Do they work? Debt Management plans, or more particularly the companies that offer Debt Management services have been much maligned in the media of late. So what is the problem with them?
Debt Management Plans have their place, there is no doubting that. In basic terms a Debt Management Plan is a roadmap to repaying your debts. It will not prevent your creditors from pursuing payment of the debts you owe. At Leathes Prior we are able to assist in the preparation of debt management plans but why not put together your own plan by following our Step By Step Procedure.
The main failing of debt management plans is that they require you to reach agreement with most, if not all of your creditors on how you are going to pay them back and often the major creditors, such as the high street banks and HM Revenue & Customs will require payment in full (or very close to it), sometimes in a relatively short period of time. Debt management plans are only really appropriate if you are having a little difficulty but, ultimately, are going to pay most (if not all) of the debt that you owe. If it is unlikely that you are going to be able to pay most if not all of your debts, seek advice.
Common criticisms made of Debt Management Companies are:
1 1) that they sell their Debt Management Plans to people for whom they are not going to work (because they will not be able to make a proposal that is acceptable to the creditors); 2 2) they use the terminology of IVAs which leads to confusion; 3 3) they make promises that they cannot always fulfill (such as “75% of your debt written off”); 4 4) they use large parts of the money that they receive to pay their own administration fees, leaving only a tiny balance to go to creditors which often is not enough to meet even the minimum monthly payment.
If you have consulted a Debt Management Company, are making regular payments to them and have concerns, seek advice.
If you are having difficulty paying your debts you should seek advice. Other options that may be available to you include entering into an IVA or bankruptcy. It is important that you understand the difference between the various options available to you. Leathes Prior's Insolvency Team is experienced in all aspects of personal insolvency and can provide advice on the options available to you. | ||||||||||||||||||
