What is a Debt Management Plan?
Where necessary, debt management is offered in the form of a Debt Management ‘plan’ which allows the client to repay what they can afford to their creditors on a monthly basis. This is a repayment plan that allows the client to repay their debts in descending order, according to how much money is owed to each creditor; for example, the more the client owes to a creditor, the more they pay on a monthly basis out of their budget negotiated through the debt management company. This is distributed to creditors in document form in a ‘Financial Assessment’.
Debt Management Companies
Debt Management Plans are distributed by Debt Management Companies, some charge a fee which is taken from the client’s budget, sometimes a ‘set-up fee’ is charged, however, some are free of charge: examples of free Debt Management Companies below:
CCCS (Consumer Credit Counselling Service)
CAB (Citizen’s Advice Bureau)
Christians Against Poverty
National Debt Line
How Do Debt Management Plans help?
Debt management plans allow the client to pay smaller, more manageable payments to each creditor through a lump sum they pay the Debt Management Company, when an arrangement has been reached with a creditor, they may be able to freeze or reduce the interest owed depending on the financial product.
The financial assessment is a breakdown which assesses income and expenditure. Monthly income and expenditure is recorded, along with the total amount the client owes in debt and a list of the affected creditors.
For more information on:
- Priority Debts
- Consumer Credit Act 2006
- Default Notices
- Debt management and Charge-offs
- Full and Final Settlement offers
- How will my credit file be affected if I enter into a Debt Management Plan?