How long will a Debt Management Plan last?
The problem with entering into a Debt Management Plan is that it can last a long time. Indeed, that time could be over ten years for more than a quarter of the people going into a Debt Management Plan.
It really depends on your personal circumstances. However, the Debt Management Company you engage should be able to estimate the likely length of the arrangement, once it has received all your personal information.
Are debts frozen in a Debt Management Plan?
In a Debt Management Plan you start off paying a fixed amount each month and this is divided – on a pro rata basis – among your creditors, less whatever your service provider charges. However none of the debt is written off by your creditors and so the Debt Management Plan will continue until every creditor is paid off in full. On top of that, in a Debt Management Plan your creditors are under no obligation to stop charging interest and indeed other penalties and charges. The debt is not frozen as it would be for example if you were to enter an Individual Voluntary Arrangement (IVA).
These are two good reasons why you should consider all of your options before rushing into a Debt Management Plan – the possible long duration and the non-freezing of debts. That is not to say that a Debt Management Plan is not suitable for many people who encounter financial difficulties. It may very well be the best – or indeed only – solution for certain people. Or it may be the best initial solution. For example, it may be that it suits someone to enter a Debt Management Plan for say six months and then propose an IVA to creditors. However it does appear that about 30% of people who are currently in an IVA or are bankrupt had previously been in a Debt Management Plan. That seems to be a rather high percentage and suggests that all available options were not always considered or that the first choice solution was not always the right decision.
What are the Advantages of Debt Management?
- It is an informal and flexible arrangement designed to suit your circumstances and needs.
- Payments are tailor made in line with what you can afford.
- You do not have to release equity from property.
- You will repay all of your debts.
- Creditors prefer Debt Management to other processes for resolving financial difficulties.
- Your details will not be put on the Insolvency Register.
What are the alternatives to a Debt Management Plan?
There are many alternative courses of action if you are in financial difficulty. You should be aware of all of your options before you decide which way to go. Some of the most common alternatives are Bankruptcy, Individual Voluntary Arrangement, Debt Relief Order, Debt Consolidation, Asset Sale & Debt Settlement and Property Remortgage & Debt Settlement. It may even be that financial assistance is available from family or friends
For more information on the full range of financial solutions available including Debt Management Plans, Individual Voluntary Arrangements and Bankruptcy, please contact us at National Debt Relief.