Debt Management UK - The Myth and the Magic
According to a recent survey the 2 main reasons people have for entering into a debt management plan are firstly that they have no money left each month, and secondly to stop creditor hassle.
Do debt management companies work their magic and address these concerns, or is it all an urban myth? A debt management insider sheds some light.
A debt management company will work with you to decide how much you can afford to pay each month.
You tell them your income, and a breakdown of your outgoings, and the difference is your monthly payment.
The company takes their fee and the remainder is distributed to your creditors.
It's not really magic, but done correctly will leave you sufficient money to live on each month.
Your creditors are then told how much they can expect to receive.
If they agree they'll stop calling you as long as they continue to receive this amount each month.
These agreements are often for a limited period, for example 6 months, and are then reviewed to see if your income or expenditure has changed, which could then mean your contribution changing.
Expect them contact you at review time if they haven't already heard from the debt management company.
If your creditors don't agree with the amount being offered they will continue to contact you, possibly with a view to taking further action.
You may be able to offer more through your debt management company, but if you can't pay what the creditors are asking for they will look at further action to recover their money.
While all this is going on you may expect that interest and charges would have been frozen.
The reality is that creditors are not obliged to freeze interest and charges for anyone in a debt management plan, so they may still be accruing, particularly if the creditors haven't accepted the offer being made.
They often agree to at least a reduction in the charges provided you pay above their minimum acceptable amount, so that your debt is seen to reduce.
However this is academic if they want more money off you and you can't afford it.
So by entering into a debt management plan you will have more money to live on every month, although this is down to you providing figures and proof, and not anything special the debt management company does.
Creditor hassle may well be reduced, but there's no guarantee.
Interest may also continue to be added, and further action could still be taken.
There is another way, however, which will give your creditors more money back than the scenario above every month while still leaving you better off.
This means they're also less likely to hassle you or take further action.
Handle the debts yourself.
Run your own plan.
I've taken people who've never done this before, and within 3 days they've all started handling plans for clients - and that includes getting used to new computer systems, etc.
You won't pay fees - the money will go instead to your creditors so they're likely to be happier.
You will be as well, because your debts will reduce quicker.
It's not magic, but neither is it a black art.
Running your own plan is well within the capability of most people.
If all you need to get started is a little help, it's available on the internet.
Do debt management companies work their magic and address these concerns, or is it all an urban myth? A debt management insider sheds some light.
A debt management company will work with you to decide how much you can afford to pay each month.
You tell them your income, and a breakdown of your outgoings, and the difference is your monthly payment.
The company takes their fee and the remainder is distributed to your creditors.
It's not really magic, but done correctly will leave you sufficient money to live on each month.
Your creditors are then told how much they can expect to receive.
If they agree they'll stop calling you as long as they continue to receive this amount each month.
These agreements are often for a limited period, for example 6 months, and are then reviewed to see if your income or expenditure has changed, which could then mean your contribution changing.
Expect them contact you at review time if they haven't already heard from the debt management company.
If your creditors don't agree with the amount being offered they will continue to contact you, possibly with a view to taking further action.
You may be able to offer more through your debt management company, but if you can't pay what the creditors are asking for they will look at further action to recover their money.
While all this is going on you may expect that interest and charges would have been frozen.
The reality is that creditors are not obliged to freeze interest and charges for anyone in a debt management plan, so they may still be accruing, particularly if the creditors haven't accepted the offer being made.
They often agree to at least a reduction in the charges provided you pay above their minimum acceptable amount, so that your debt is seen to reduce.
However this is academic if they want more money off you and you can't afford it.
So by entering into a debt management plan you will have more money to live on every month, although this is down to you providing figures and proof, and not anything special the debt management company does.
Creditor hassle may well be reduced, but there's no guarantee.
Interest may also continue to be added, and further action could still be taken.
There is another way, however, which will give your creditors more money back than the scenario above every month while still leaving you better off.
This means they're also less likely to hassle you or take further action.
Handle the debts yourself.
Run your own plan.
I've taken people who've never done this before, and within 3 days they've all started handling plans for clients - and that includes getting used to new computer systems, etc.
You won't pay fees - the money will go instead to your creditors so they're likely to be happier.
You will be as well, because your debts will reduce quicker.
It's not magic, but neither is it a black art.
Running your own plan is well within the capability of most people.
If all you need to get started is a little help, it's available on the internet.
