{"id":12382,"date":"2011-12-02T12:42:16","date_gmt":"2011-12-02T12:42:16","guid":{"rendered":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/?p=12382"},"modified":"2020-10-20T11:37:39","modified_gmt":"2020-10-20T10:37:39","slug":"dmp-explained-2","status":"publish","type":"post","link":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/dmp-explained-2\/","title":{"rendered":"Debt Management Explained"},"content":{"rendered":"\n

Essential Truths about Debt Management Plans<\/h2>\n\n\n\n

Anyone who is considering entering a Debt Management Plan should take\n time to learn about the essential facts of the Debt Management Plan and\n the way it deals with personal debt problems before taking the plunge.<\/p>\n\n\n\n\n\n\n\n

How long does a Debt Management Plan last?<\/h2>\n\n\n\n

While a Debt Management Plan can last for a relatively short time i.e. for just a few years, most Debt Management Plans last much longer than that and ten years would not be an unusual duration.<\/p>\n\n\n\n

\"Debt<\/figure>\n\n\n\n

For one in four people entering a Debt Management Plan, the projected life would be in that sort of range. Everything really depends on the debtor\u2019s personal circumstances. However, the Debt Management Company which the debtor engages to manage the plan should be able to estimate the likely length of the arrangement, once it has received all the relevant information regarding the total amount of the debts, the debtor household income and expenditure, details of any assets the debtor may have and the domestic, financial and work circumstances which were the cause of the problem in the first place. <\/p>\n\n\n\n

Are unsecured debts frozen once the debtor commences the Debt Management Plan?<\/h2>\n\n\n\n

In a Debt Management Plan the debtor starts off paying a fixed amount\n each month and this is distributed on a pro rata basis amongst the \nunsecured creditors, less whatever the Debt Management Company charges. \nHowever none of the unsecured debt is written off by the creditors and \nso the Debt Management Plan will continue until every creditor is paid \noff in full or until the debtor decides to exit the Debt Management \nPlan. Creditors are under no obligation to stop charging the interest \nand indeed other penalties and charges. The debt is not frozen as it \nwould be for example in an Individual Voluntary Arrangement (IVA). \nHowever, in reality many creditors do stop charging interest and \npenalties once they are convinced that the debtor is in a bone fide Debt\n Management Plan and is serious about maintaining the monthly payments. \nThe Debt Management Company plays a crucial role in persuading creditors\n to forego interest and penalties.<\/p>\n\n\n\n

The potentially long duration of the Debt Management Plan and the \nnon-freezing of debts are the two main reasons why debtors sometimes shy\n away from entering into a Debt Management Plan. That is not to say that\n a Debt Management Plan is not suitable for many people who encounter \nfinancial difficulties. It may very well be the best or indeed only long\n term solution for certain people. Or it may be the best initial \nsolution for a short term problem. For example, it may be that it suits \nsomeone to enter a Debt Management Plan for say six months and to then \npropose an IVA to creditors. However it does appear that about 30% of \npeople who are currently in an IVA or are bankrupt had previously been \nin a Debt Management Plan. That seems to be a rather high percentage and\n it suggests that all available options were not fully considered in the\n first place or that the Debt Management Plan choice may not have been \nthe right decision. <\/p>\n\n\n\n

What are the advantages of a Debt Management Plan?<\/h2>\n\n\n\n

The fact that a Debt Management Plan is an informal and flexible \narrangement is likely to suit the debtor\u2019s financial circumstances and \nneeds. The debtor only pays what he or she can afford and payments are \ntailor made for each debtor. The debtor repays 100% of all unsecured \ndebts in a Debt Management Plan and does not have to be insolvent to \nenter into a Debt Management Plan, in contrast to an IVA or bankruptcy. \nThe debtor does not have to release equity from property unless he or \nshe wants to do so. Creditors prefer Debt Management to other processes \nfor resolving financial difficulties mainly because there is no debt \nwrite off as such and creditors have a good prospect of getting all \ntheir money back in contrast to an IVA or bankruptcy where they are \nunlikely to recover more than perhaps 30% of debts. Publicity is minimal\n in a Debt Management Plan and the debtor\u2019s family, friends, neighbours \nand employer are unlikely to find out about it since the details are not\n put up on the Insolvency Register, unlike the practice in an IVA or \nbankruptcy.<\/p>\n\n\n\n

Are there alternatives to a Debt Management Plan?<\/h2>\n\n\n\n

There are many alternative courses of action for a debtor who \nencounters financial difficulty and all options should be considered \nbefore deciding which way to go. Some of the most common alternatives \nare bankruptcy, Individual Voluntary Arrangement, Debt Relief Order, \nDebt Consolidation, Asset Sale & Debt Settlement and Property \nRemortgage & Debt Settlement. It may even be that financial \nassistance is available to the debtor from family or friends. Getting \nsound advice before proceeding is crucial.<\/p>\n","protected":false},"excerpt":{"rendered":"

Anyone who is considering entering a Debt Management Plan should take time to learn about the essential facts of the Debt Management Plan and the way it deals with personal debt problems before taking the plunge.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"none","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[4],"tags":[],"class_list":["post-12382","post","type-post","status-publish","format-standard","hentry","category-debt-management-articles"],"_links":{"self":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/12382","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/comments?post=12382"}],"version-history":[{"count":2,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/12382\/revisions"}],"predecessor-version":[{"id":13541,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/12382\/revisions\/13541"}],"wp:attachment":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/media?parent=12382"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/categories?post=12382"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/tags?post=12382"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}