In today’s fast-paced life and increasing expenses more and more people are finding it difficult to meet their financial commitments. This could lead to getting into serious trouble with creditors. It could even lead to bankruptcy or, in extreme cases, imprisonment.
In order to deal with this situation, UK legislation has allowed for debt management in the form of Individual Voluntary Agreements (IVA’s) and, in Scotland, Protected Trust Deeds. Your choice of a debt management plan will greatly depend on what your debt situation is, as well as where you live.
The first question that you need to ask yourself about a debt management plan is whether it is a suitable option for your situation. If you have debt accrued from credit cards or store cards (or something similar), an IVA will be a suitable solution for you. Other debt may qualify if you’re going through a temporary financial crisis and will be able to pick up larger payments after 12 months.
Should your debt become so serious that you are sued and end up in the county court, the court will take a close look at your finances. If they find that you are indeed in dire straits where your finances are concerned, the court can order you to participate in a debt management plan. The court will order a repayment plan after taking your entire budget for essential expenses into consideration. They will also put a freeze on interest and other costs to prevent the amount that you’re repaying from growing and becoming unmanageable.
Of course you can set up your own debt management plan before it needs to go to courts. This can be done either by you or a debt management agency. The two best known charitable agencies are Citizen’s Advice Bureau and the National Debtline. In addition to the charitable agencies, there are several for profit agencies that charge a fee to assist you with your management plan.
It is usually better to consult an agency – even if you choose one that will have a fee attached to it – as creditors tend to look more favourably on offers negotiated by professional debt advisors. Should you work through an agency, you also have the benefit of not having to deal with creditors again. Creditors a prohibited from contacting you when you’re on a debt management plan. The agency takes over all communication and creditors have to send all correspondence to the agency. The advisor will let you know of any significant issues that arise.
Remember that there are free debt management agencies and then there are profit making agencies. Depending on your financial situation you may want to consider both before committing to an agency. Profit making agencies take up to 15% of the repayment amount as an administrative fee before they pay over the rest of the money to your various creditors. If this practice is going to make it more difficult for you, you want the free option.
Tags: Advice Bureau, Charitable Agencies, Creditors, Debt Management Plan, Debt Situation, Dire Straits, Extreme Cases, Financial Commitments, Financial Crisis, Imprisonment, Management Agency, National Debtline, Profit Agencies, Repayment Plan, Serious Trouble, Store Cards, Suitable Option, Suitable Solution, Uk Legislation, Voluntary Agreements
