In Debt But Unsure How to Get Out?

The following article aims to help any number of the consumers recently negatively affected by the credit crunch to identify some warning signs of an underlying debt problem. The Debt People report on what to expect from a professional debt management plan, and how to ensure it works for you.

What is Debt Management?

Debt Management is an informal agreement between you and the creditors you owe money to.

The aim of a Debt Management Plan (DMP) is to help you get out of debt quicker and to help you make a fresh start with your finances.

Who can be helped by debt management?

Debt Management is most suitable if you are unable to keep up with your current unsecured credit commitments (personal loans, overdrafts, store card and credit card debts) each month. There are often many early signs of an underlying issue, which when left untreated can lead to an increased risk of debt problems developing and potentially bankruptcy.

No matter how much money you owe, if you are struggling with your current unsecured credit commitments, seeking some impartial debt help is always recommended.

What are the common signs?

You may not think that you currently have a problem with your debts, but often there are some signs that indicate a potential underlying problem. Whilst not exclusive, these items below are some of the signs to look out for and to be aware of:

Using your credit card regularly each month to pay for food, fuel or household bills

Having four or more lines of credit (loans, store cards, overdrafts etc) – having more lines of credit available means that you have an increased risk of developing debts on these facilities

Missing or late payments towards your current commitments

Spending more money than you earn each month

Constantly living in your overdraft

Using credit cards for cash advances

Only making the minimum repayment on store card and credit card debts

If any or all of these apply to you, it would be wise to contact an impartial organisation sooner rather than later for some FREE debt advice and information on how to deal with your unsecured balances.

If you are in debt an need help call the Debt People on 0161 927 8001

How does debt management work?

Debt management helps you to regain control of your finances by gathering all of your monthly repayments into one single monthly payment - thus simplifying finances. Generally a specialised debt help organisation will be used to set-up and manage the programme for you.

They will calculate the amount you repay each month, based on your current income (including benefits, tax credits etc) and expenditure (including mortgage/rent, utility bills, council tax, food, travel etc). Monthly payments to creditors are then distributed on your behalf to creditors and are negotiated to be rescheduled over a longer period of time to make the repayment amount more affordable.

Debt Management involves a flexible and non-legal agreement between you and the people you owe money to. This means that you aren't tied-in to a contract and that it can be altered to suit your changing financial circumstances - so will always be affordable to your financial situation. It also means that if you are made redundant or receive lower wages, your repayments can be changed accordingly.

Alternatives to Debt Management

Whilst a debt management plan may be beneficial to many people who are struggling with their unsecured balances, there are other alternative options available that should also be considered. These include:

An Individual Voluntary Arrangement (IVA) – An IVA is similar to a DMP in that all unsecured balances are simplified by gathering them into a single monthly payment. Unlike with a debt management plan, an IVA is repaid over a fixed period of time – usually five years. This means that after this time all remaining unsecured balances are effectively written-off and you will be debt free. An IVA involves a legally-binding agreement (drafted by a qualified Insolvency Practitioner) which protects you from creditors changing their minds and demanding increased payments. Please click this link for further information or immediate free IVA advice.

A Trust Deed – Trust Deeds are similar to Individual Voluntary Arrangements (IVAS) but are for people living in Scotland. Like an IVA, all unsecured balances are gathered into a single monthly repayment, but this is usually repaid over a shorter period of time – typically over three years. Please click here for further information on Trust Deeds.

If you are in debt an need help call the Debt People on 0161 927 8001