A debt management plan is a debt solution anyone in the UK who has debts can enter if they are able to repay their debt. The ideal debt management plan will last for 3 years and interest and charges will be frozen. Sadly not all organisations will freeze interest and charges for people who are entering a debt management plan. If interest and charges are not frozen they should be taken into consideration when calculating how long the solution will last. There are two types of organisations who will help people setup and run a debt management plan. These are for profit, fee charging companies and free, non fee charging organisations.
Debt Management Plan: For Profit
A for profit company will charge take their fees from the monthly contribution made towards the debts. This means not all the money paid will be going to repaying the debt and takes longer to clear them. While some companies will claim they can guarantee to freeze interest and charges this simply isn’t true. If these are not frozen and fees are being paid on top it’s unlikely the debt will be repaid within a reasonable period of time.
Debt Management Plan: Free
There are organisations who will setup a debt management plan, negotiate with creditors and manage it without taking a fee. This allows every penny paid each month to go towards clearing the debt and not just managing the solution.These organisations will get a fee or donation from creditors instead.
Debt Management Plan: Other Solutions
If a debt management isn’t suitable for one reason or another people will be suitable for one of the solutions below. IVA: Helps people in debt by letting them pay only a percentage of the debt they have outstanding. The monthly contribution will last for 5 years and any debt remaining at the end will be written off. Bankrutpcy: This should only be considered as a last resort to dealing with debt because bankruptcy can be a difficult solution. Only people who cannot afford a monthly contribution to their debt or have little to no assets should consider bankruptcy. If someone enters bankruptcy while they have assets or a disposable income the official receiver will demand they pay towards their debt.