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If you are planning to do something about your debt problems, you may find there are a number of solutions available to you that will help ease your financial difficulties. Among them is a debt management plan - a voluntary agreement between you and your creditors that will involve you arranging to repay a proportion of what you owe by making a set monthly payment for a fixed period of time. Unlike an individual voluntary arrangement, a debt management plan is not a legally-binding agreement and there is no obligation on your creditors to accept the terms of any plan put to them. However, as it will help you to reduce your debts and assist your creditors in recovering some of the money you owe, the plans are often seen as beneficial to both parties. If you seek professional help with debt, it is likely to be one of the options that your advisor discusses with you. Before that stage, the first step towards deciding the best way to alleviate the pressure will be to carry out a thorough examination of your financial position. Your advisor will help you to calculate the total amount of money you owe to your creditors, as well as the sum you can realistically afford to repay every month after deducting essential living expenses from your income. If they find your debt repayments are not leaving you with enough money to pay for essentials, or that you only have one or two creditors, your advisor may recommend a debt management plan. The advisor will then help you put together a plan, setting out exactly how much of your debt you can afford to repay, the monthly repayment you propose to make and the duration of the agreement. This will form the basis of your proposal to your creditors, who will decide whether or not to accept it. If they do, you will then only have to make only monthly payment to your debt management plan provider and they will distribute the money to your creditors. The simple arrangement process and the straightforward way they operate mean debt management plans can be one of the easiest ways to reduce the amount you owe. However, you should be aware you will have to pay a fee to arrange the plan and that it may damage your credit rating. If you may be in need of a debt management plan, get in touch with Debt Options for advice. We can provide help with debt in a number of ways, including IVAs and debt management plans.
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