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Debt Management compared

Your guide to all Debt Management

Debt Management is appropriate for those with any type of credit rating and can be applied for online today. If you have debt to more than one creditor then Debt Management is a good option for you.

Debt Management Companies Grow in Numbers

During the credit crunch, many involved in the financial services industry are diversifying into areas such as debt management in order to maintain their turnover. This therefore means an increased availability of debt management help for those in need.

Many companies involved in the financial services industry, for example mortgage brokers, have seen a dramatic reduction in their income as a result of the credit crunch. Consequently, these companies are seeking revenue from alternative sources. One of these sources is in the form debt management, which can be a good thing for those in need of help with debt problems. An increase in the number of debt management companies could cause a reduction in charges for this service, due to increased competition.

So, how can these companies help people in financial difficulties?

When someone gets in contact with a Debt Management company, the company will look at the client's monthly income compared to outgoings, in order to decide what course of action will be appropriate in a given set of circumstances. When making this decision, the company will take account of priority debts and non-priority debts, as these must be treated differently.

These must be given precedence due to the extreme consequences of non-payment, and include: -

1. Mortgage and rent arrears
2. Utility bills arrears
3. Magistrates court fines
4. Child maintenance arrears
5. Hire purchase arrears
6. Tax and VAT arrears

The consequences of non-payment of any of these types of debt could entail eviction, repossession, disconnection of utility supplies, bankruptcy or even imprisonment.

Once priority debts have been taken care of, a debt management company will assess how much remaining income there is for the payment of non-priority debts. These include credit cards, overdrafts, unsecured loans and catalogue debts, and often the debt management company will be able to come to an arrangement with the creditors by setting up a Debt Management Plan.

Under a Debt Management Plan the company will contact creditors to agree a manageable monthly repayment amount for each of the client's debts. Creditors will often agree to these amounts, because it means that they will get paid eventually, without incurring the expense of taking the client to court. Whilst the client is part of a Debt Management Plan, the debt management company handle all creditor letters and phone calls, removing these stressful factors from the client.

Debt Management Plans are useful for people who can afford to pay at least £100 a month off their debts, and usually apply to people who have more than £5000 worth of debt and owe money to at least three creditors.

Debt Management Plans are just one of the solutions available to people with debt problems, so if there is very little disposable income remaining after the payment of priority debts, it may still be possible to find a solution, which could avoid bankruptcy. Other solutions on offer include Debt Consolidation and Individual Voluntary Arrangements (a legally binding agreement with creditors). It is advisable for consumers to contact a debt management company which can assess the circumstances of each individual.