Anybody with a debt problem ought to have a look at the different choices around before selecting what course of action to plump for. Debt Management often is reckoned to be the poor relation in plethora of unsecured debt remedies. But without doubt, it remains very popular with people coming from a wide variety of backgrounds who have encountered personal financial difficulty. Here are a few of the reasons why it could be your best and indeed only course of action.
Creditors might well be agreeable to a Debt Management Plan. While creditors might generally prefer that individuals honour the terms of their original legal agreements and pay back the money they owe 100 % and in time they recognize that in the real world various borrowers are going to fail and threaten to go into default. In that case, lenders want to maximize the amount of the lent money that they can recover and recover the money in as quick a time as possible. A Debt Management Plan is a plan to repay all of the liabilities but at a slower pace than at first contracted and during a longer time than at first contracted. Given that the Debt Management Plan pledges and projects settlement of the debt in its entirety, from the perspective of the creditor, it is a clearly better solution than bankruptcy, because in bankruptcy only a small amount of debt is ordinarily paid back. A Debt Management Plan is even better than an Individual Voluntary Arrangement or IVA wherein lenders commonly get back less than half of the money owed and sometimes a lot less.
You don’t need to be insolvent to get into a Debt Management Plan either. Debt Management is really an informal course of action.
Not much legislation has been passed thus far in this area even though government has been making promissory noises for many years now. There is a fair level of control by bodies such as the DTI and the OFT. Even though between your income and assets there could be sufficient money to settle your debts in full in accordance with the terms of your contracts with your creditors you may be disinclined or powerless at present to execute some of the necessary actions to achieve this. You might not wish to sell your property, for instance. Simply by entering a Debt Management Plan you might be able to deal with your finances in a more organised way and sell or re-mortgage your home at a point in time that best suits you or when the marketplace is more favorable or when re-mortgage rates are more affordable. You do have to be insolvent in order to enter an IVA or to be proclaimed a bankrupt.
A Debt Management Plan gets significantly less publicity than bankruptcy and much less than an IVA. Your neighbours, your work colleagues, your employer, your friends and your family needn’t learn about your Debt Management Plan and while there aren’t any guarantees, there’s a pretty good chance that you can keep the reports of your Debt Management Plan away from others of a nosy frame of mind. If there aren’t any creditors amongst your neighbours, employer, work colleagues, friends or family members and so long as you behave prudently, then you can be fairly positive that you can keep your Debt Management Plan private. Professional debt management service providers as well as CCCS, CAB and Payplan all provide total discretion and privacy in their transactions with you and no data should be exposed by them to any others such as are mentioned above. Only your creditors will be contacted and even that cannot take place without your prior agreement and written authorization. The typical procedure is that you would officially authorize your Debt Management Plan provider to contact your lenders, to get or to validate information on your indebtedness from them and to negotiate with them as your representative.
You might start off by going into a Debt Management Plan for a period of time and later enter into an IVA. Why would you want to do this and just how might it help you? One rationale is that your current situation might lack the monetary stability necessary for an IVA at present but that after a finite time period of let’s say six to twelve months, that stability might be established. Then again your solvency standing might not be apparent at first but you are convinced that you’ll come to be insolvent in the future. Or again, you might be undergoing divorce procedures at the moment and there may be a lack of clarity pertaining to future income or in relation as to how the marital assets are to be divided. It may be sensible in these conditions for you to go into a Debt Management Plan until the divorce and its settlement terms are finalized and then to enter into an IVA if the divorce should bring on your insolvency. In another scenario, you could possibly suffer a loss of your employment and be made redundant. You could decide to become self-employed as, for instance, a taxi driver. Lenders would be likely to reject proposals for an IVA before any self employed trading record is established and so a brief timeframe Debt Management Plan might be the best first strategy until you were trading for a realistic period of time and so be able to illustrate regular and steady earnings.
A Debt Management Plan may be the only financial choice accessible to you at present. In certain jurisdictions such as Ireland, a Debt Management Plan could be the only financial remedy open to you. While bankruptcy is theoretically obtainable as an option in Ireland, the cost of the process and the draconian sanctions connected to it ensure it is an unworkable route for personal insolvency. Just a handful of bankruptcies occur annually in Ireland. There were just ten bankruptcies in Ireland in 2010 and just thirty three in 2011 and there is no insolvency process remotely similar to an IVA offered as yet under Irish Law to Irish citizens living in Ireland. Whilst the government funded Money Advice and Budgeting Service (MABS) does offer advice to people in Ireland, that organization doesn’t have the means to handle debt management plans to the same degree as professional DMP providers. The Irish Government is planning to enact a new personal insolvency law but it is likely to be the end of 2012 before Irish citizens can take advantage of it.