Debt Management Plan (Debt Management Programme)

A debt management plan is an informal arrangement between a borrower and their creditors when general contractual payments cannot be met due to the borrower facing financial difficulties.

The Debt Management Plan was introduced in the UK by the Consumer Credit Counselling Service (CCCS) almost 20 years ago. At that time, it was a debt solution that dealt with the fallout of unsecured lending as the personal lending market was expanding at a rapid pace.

A Debt Management Plan offers a structured agreement to pay all unsecured debts, instead of writing off some of the loans that would would within formal debt solutions such as Individual Voluntary Arrangement (IVA).

This agreement runs over a longer time than formerly agreed, with one affordable payment per month that the debtor is able to meet after having taken in to account their personal circumstances. The payment is distributed to lenders on a pro-rata basis.

A statement of income and expenditure is produced in order to decide just how much a person could realistically afford to pay after paying for all of their everyday living expenses.

One of the most important things about a debt management programme is that it provides an affordable way to subsequently pay off all the person’s debts. It makes sure the debtor has enough funds to afford everyday living expenses, instead of being obligated to give creditors their funds before living expenses are taken care of.

Having said that, you will find pluses and minuses in a programme such as this. A Debt Management Plan is an informal solution, which means that creditors don’t have to accept the programme – nevertheless the most companies do, and a number of freeze interest or fees, which means the money is paid back a lot quicker than it would be if the interest was still accruing.

One creditor disagreeing with the implementation of a DMP can not bring down the programme, but will make it more challenging for the debtor to pay off all of their debts successfully. In these rare cases the debt is still paid at the reduced pro-rata rate and your debt adviser will keep pushing for them to recognise the offer by proving that you are sticking to your revised payment schedule.

Setting Up a DMP

For those thinking of entering a DMP, you can organise it yourself and you can find web sites or internet forums that advise on the easiest way to go about this. It calls for creating a budget sheet – showing incomings, outgoings and debts – to clearly show what money is left over after essentials, household bills and priority bills are paid.

You then need to speak with each creditor, in turn, and ask them to accept reduced monthly repayments from any excess amount.

It should be noted, however, that it is a complicated procedure to set up a DMP on an individual basis and it could be fraught with problems, including negotiating with the very same lenders that are chasing you for money. For those in an overwhelmed state of mind this is just too much to contemplate.

Instead, we suggest that a third party arranges a programme for you so there’s an middle man between you and your creditors.

Getting this buffer means that for the duration of this stressful stage, when creditors and debt collection agencies are calling you continuously with demands, you have someone else acting in your greatest interest.

The advantage of using a go-between also comes from their relationships with the creditors. As they arrange countless DMPs each year, they are often in a stronger position to negotiate with the lenders.

DMPs provide a clear framework for paying off your debts and, should your creditors agree to the DMP, they’re incredibly practicable.

If you fail to adhere to the DMP repayments then other options might need to be considered, such as formal options like individual Voluntary Arrangement (IVA) or bankruptcy.

Learning to Avoid Scams That Claim to Eliminate Debt

A recent letter to the editor in the in the Daily Mail’s Money section, has shown that some companies which offer to help get debt written off are actually operating as scams. In one instance, a British woman was approached and offered the chance to have her debts cleared through having them written off. In this case, the debts were in the form of credit card balances and the individual offering to help the woman claimed that they could all be removed if he was paid a fee.

After paying more than £5,000 to have this credit card debt cleared for her, the woman’s primary contact with the alleged scammers began to refuse to respond to her phone calls and emails. This is said by consumer financial experts to be a common type of scam and is generally able to fly because those in debt desperately seek a solution. Believing that they can not receive help any other way, they fall victim to large promises and impractical solutions. In fact, the “solution” the woman was sold on was actually that her case would be passed on to a company that seeks out loopholes to have her credit card debt written off. This questionable type of approach is not generally going to work and, even if it does, tends not to work towards the debtor’s best interest.

A far easier route that actually gets results and is a respected way to handle debts is to enter into a real arrangement with the creditors. This is what Debt Management is all about and it can certainly make life considerably easier for those who choose this route. If you would like to learn more about how Debt Management can help you, please examine the sites to the right which are legitimate debt help firms we have provided links to as a neutral source of information for those in debt.

Some Worry Rescue of Public Sector Debt Advice May Not Be Enough

The quick reverse from the Government regarding the £27 million rescue of the Financial Inclusion Fund (FIF) came as a surprise to many who were expecting the loss of 900 specialist debt advisors from the Citizens Advice Bureaus (CAB). Instead, the FIF will have funding for 2011, but many experts say that this debt management for the public sector will most likely not bee enough to help all of those in the United Kingdom that are struggling with considerable debts.

The CAB and other agencies of debt advice had lobbied hard to keep the FIF funding going, but this is definitely a serious issue that will need more than a quick patching, say UK experts. Those who staff the CAB’s around Britain are expected to stay in place and continue offering their counsel, but consumer advocates say that there are not enough staff to help everyone. For this reason, private debt management firms continue to operate and offer their services.

As a soaring cost of living sets in with food prices on the rise across the globe due to a spate of recent natural disasters, UK citizens are also faced with heavy job losses and VAT increases that are not making financial stability easy to achieve. The Government continues to worry that mounting debt among British consumers will be a serious issue, even more so than it is today. While the injection of cash to fund CAB for a brief while longer will help, the economy is creating need faster than public sector debt advice can keep up with, thus creating a strong need for private sector debt management firms. Since debts are time sensitive, many turn to the private sector to have their needs met more quickly and stop debts from accruing at a more rapid pace.

If you yourself are seeking debt management help, please feel free to check our our Live Chat at the top of the home page. Someone will be able to help you or if you prefer, the links to your right can show you debt management firms we find to be trustworthy. Act now if you need help because relief is definitely worth seeking.

Swift Change in Debt Advise Funding for 2011

Things changed rapidly in the United Kingdom this week as yet another change has come down the pipe: the Government has changed its mind on the funding of debt advice centres. A large number of debt advice specialists have had their jobs saved at the last minute thanks to the fact that £27 million in Government funding was budgeted for their services at the last minute. However, not all of the debt management centres will be staying open because many continue to rely on local funding in addition to national. That means that choices will still be limited despite the change.

The change in the budget means that the Financial Inclusion Fund’s £27 million needs have been met, but only for this coming year. Debt advisers were about to be made redundant, but the funding will allow approximately 500 of them in both Wales and England, to continue offering their services. Now that they can disregard their redundancy notices they received only a short time ago, these advisers will be able to carry on as usual, trying to help people during one of the worst debt crises the UK has seen in many years. According to some, this could actually be a historic peak of consumer debt and the removal of these services could have pushed that bar even higher.

More than 100,000 people are helped annually who face complex debt cases and many of these people are in debt due to ill health, a serious injury they suffered or other situations beyond their control. Lack of access to quality debt advise could put them at serious risk. These particular specialist whose jobs have been saved posses skills that go beyond what the Citizens Advise Bureau can offer in their free advise. They are able to go to lenders on behalf of the debtor to seek a resolution to a situation.

Still, even with funding these centres have only so many free advisers who can only deal with so many people at a given time. If you are seeking help from reputable debt advice providers then you are certainly encouraged to explore the links to your left which have been accrued here as a resource for those seeking debt help. Since there is always a way out of even the most complex debt situations, it is certainly worth exploring those options.

PM Cameron Speech Raises Concerns for Some

At speech during the World Economics Forum which took place recently in Switzerland, UK Prime Minister David Cameron brought up British debt management in a move that caused some in his home country to raise their eyebrows. The reason for noticing this particular topic in the PM’s speech is due to the fact that the Government has indicated it has plans to do away with the Financial Inclusion Fund. According to Cameron, the UK needs to focus on savings and investments as opposed to consumption and debt, at the economic level.

Some watch dogs for consumers believe that this could be indicative of a coalition government attempt to, at least in gesture, bring up the tremendous debt burdens being faced by huge numbers of British citizens today. With insolvency on the rise towards record breaking levels and more than £1.5 trillion in personal debt in the UK today, many believe this would be a timely and relevant topic for the PM to address.

At the same time, any real hope of Cameron advocating assistance to UK citizens facing struggles with debt was nullified by the report released from the Legal Action Group a short time later. In that report, it was made known that the Financial Inclusion Fund is set to end this March since legal and and local government grants are taking sharp cuts. This means that the approximately 500 advisors whom the Financial Inclusion Fund previously employed to help nearly a hundred thousand Britons with their debt problems as part of the Citizen’s Advice Bureau and similar centres in the not for profit sphere will now be unavailable to counsel. Instead widespread redundancy will affect the majority of these advisors.

Some experts who work for charities have expressed dismay at the situation, pointing out that there is an increased demand today for debt advice due to rising unemployment and such a difficult economy. With the advisors lost, it will be far more difficult for those in the UK who are struggling with debt to know where to turn.

If you face debt struggles yourself, you should investigate the options to the right of this article. This site has been created as a neutral voice for fairness in debt issues and a resource for those who struggle with debt. The organizations featured here are presented for your convenience so you can take control over your situation by arming yourself with sound debt advice from trusted sources to find solutions that work for your life.

UK Government Shutting Down Unsavory Debt Management Companies

In the United Kingdom, the Office of Fair Trading has come out swinging against predatory debt management companies that have been deemed unscrupulous due to their practices of taking advantage of those who are facing rough financial times. Consumers with nowhere to turn had put their trust in these companies, nearly 130 of which were sent warnings by the OFT in September of 2010. Now, close to three dozen of those firms have been forced to hand over their licences for handling consumer credit.

A probe the OFT has taken into this particular market has meant that 15 such companies actually warrant criminal investigations for their activities that some in the British media have called ’shameful’ and ‘confounding’. More firms are being thoroughly sniffed out by the OFT in regards to their business practices and adherence to UK business ethics. This checking into the market that is supposed to be helping cash strapped consumers reorganise their debts was done as a way to find out if the companies were complying with UK regulations and sadly, many have not been.

Financial experts say that the best debt management firms will still be in business, unlike those which had resorted to targeting consumers with phone calls from sales people trying to get them to sign up for services. Those with debts might have at first recoiled from the high pressure sales tactics, but the burden of debt often puts people in a vulnerable position and having the phone ring for something other than a collections agency can even be a bit of respite that offers hope. These tactics are certainly frowned upon by most in the UK as less than savory at best or down right predatory at worst.

Banks have been vocal in their criticism of these unscrupulous firms, particularly the way the firms would attempt to persuade UK consumers to neglect paying off loans without a proper warning of what the results of that route could be. Proper debt management firms, none of which have been found in violation by the OFT, have strict guidelines on keeping their clients fully informed of the results that any action can bring because their business is based on improving lives, not grabbing up money at the expense of clients and lenders alike.

Overall, debt management firms continue to provide valuable service to those with debts in the UK, however, experts are quick to point out. Now that the schemers are being driven from the market, it will be far safer for British debtors to choose a firm they know they can depend upon for help resolving their personal debt issues.

Slow Home Sales in UK Said Due to Lack of Mortgages

Typically, during the Autumn months, the United Kingdom’s housing market tends to see something of an upswing, but that is not the case in 2010, say house building groups across the nation. Instead, due to a lack of mortgage finance, first time buyers are being left completely out of the loops when it comes to being eligible to purchase a new home.

This comes as no surprise to consumer finance experts who say that with so many people in debt now, it is nigh to impossible for them to even consider taking on more debt. Those struggling are still being advised to pursue Debt Management Plans if their debt is small since most advocates view this part of the recession as the lower mid point of the cycle, meaning that those who take care of their debts now will be in a good position once the lending and housing markets bounce back.

Leading builder Persimmon says that the sales levels for September did rise each week, but the typical Autumn jump was nowhere to be seen. Even the amount of consumers merely looking was down sharply from a year before.

In terms of the British housing market, Autumn is the 2nd most important season with Spring being the clear leader, traditionally speaking. Summer being the time to take a holiday, the market generally surges again in September. This is making builders nervous as they fear that the housing market is is definitely starting to head back down further than before.

House prices, too, are looking as if they will experience a very steady decline, according to estate agents. Even Halifax and Nationwide, mortgage lenders, have seen released data that shows falling prices across the UK. Despite the lower prices, however, the availability of mortgages remains scarce. Consumers face large deposits and this means that with such poor terms, first time buyers are practically locked out of the market which, in turn, strikes directly at the profits of builder. Redrow even termed the current situation a ‘mortgage famine’ and has complained that it is not a good way to help the economy rebound.

While the market looks bleak for buyers, the industry itself is managing to handle its own debts with builders like Persimmon restructuring their operations to adjust to current economic realities in Britain.

Rules for Debt Relief may be Made Easier

It appears that new rules and regulations may be put into place to allow UK residents that have pensions to use debt relief orders in order to fight back and rid themselves of their insolvency. Business departments around the UK are coming up with certain changes that can be made to DROs that would make them more easily accessible for people so that they do not always have to turn to bankruptcy or individual voluntary agreements.

Debt relief order rules can allow people to rid themselves off a lot of debt within as little as a year, but people cannot use them if they have any assets that are more than 300 pounds in value. This means that at the moment it is hard for anyone with a pension fund to access a DRO, but that may all change soon.

Although these DROs were only introduced in April, there is already a plan for a new common sense change that would allow easier rules and let people with pension funds still take advantage of their benefits. Essentially these debt relief rules target people that have less than 50 pounds of excess income each month and have debt that is lower than 15,000 pounds. 12,000 people have used these DROs since they have been put into place and the government is trying to find a way for more people to use them.

The only discussion right now is how to determine how big of a pension pot should be before people are not allowed into the process, and where to draw the lines. There has been a lot of concern that people were getting denied for these rules even though they met all the criteria, and reports showed that 96% of people were excluded from the DRO process based on their pension. And in 78% of those cases the citizens pension funds were less than 5,000 pounds.

Debt Charities calling for Help and Better Practice

Many people across the UK and especially some debt charities are calling on big members of the credit industry to start offering more help, and more solutions when it comes to the credit crisis. There are many that are urging for everyone to start working together in order to fight debt and possibly create a best practice policy.

A new report was recently put together by a group including the Money Advice Trust, Institute of Money Advisors, and the Citizens Advice called on all kinds of creditors to start of discussions that could lead to policies that will help the nation improve debt collection. As of now there are more and more individuals dealing with bankruptcy and more and more bills that are going unpaid, so the creditors need to step in and do something to improve the situation.

The report itself was mainly focused on five different steps that the credit industry could take and focus on ideas such as providing more information and support to citizens as well as creating a culture that is more organized and focused on being debt-free. The idea is that giving people the support and information that they need to fight debt will have a huge impact on the debt of the nation in the following years.

This report has followed one that was recently done by the Citizens Advice group that noted that there are a record amount of people seeking help when it comes to debt, yet not enough support or debt management programs that will help to go around. If the nation wants people to climb out of debt then it may just be up to the big businesses and the credit industry to give them a hand in getting back on their feet.

Consumers Becoming More in Touch with Finances Due to Bank Crisis

Recent surveys have shown that UK consumers are far more connected and educated when it comes to their personal finances, and the major reason has been the bank crisis that the nation is dealing with right now. However, even though consumers are more aware surveys also showed that fewer citizens are paying down their debt or employing a debt management plan.

A separate survey commissioned by YouGov also noted that many UK consumers are willing to switch banks or move on for better plans, which means that banks are going to have to up the ante very soon. Consumers noted that they are quite scared off locking in their money for a lengthy period of time or putting all their eggs in one basket in terms of banking institutions. While that isn’t much of a debt management plan, it will definitely affect the way banks conduct business in the future.

While consumers are worried about the safety of their bank more than they were in the future, they are quite pleased that they know more about their financial situation than they used to. All of these reactions come on the heels of the collapse and bankruptcy of banking institutions in Iceland, Bradford, Bingley, and Northern Rock, and all the government rescues that have saved other institutions from bankruptcy.

Despite all of the awareness, pollsters noted that UK consumers were still not doing much in terms of protecting their finances. Less than half of the people in the survey said they were paying down more debt than they used to and less than 40% were putting more money aside in terms of their debt management plans.

In all, it does appear that consumers are taking more and more steps to understand their finances, but have yet to make any substantial moves to avoid debt and bankruptcy. It is a clear indication of a big difference in action and inaction but many feel that it will change drastically over the next year or so.

Another note from the survey is the fact that it appears many more UK consumers are comparing banks and contemplating switching their money over. That is good news for policymakers in the government as it means that there will be far more competition in the high end banking world. The government has been forcing certain institutions to divest part of their companies and consistently gives bonuses and rewards to new entrants into the industry.

Over half of the participants in the survey said that they would now consider using a provider that is non-traditional, which is a huge jump from recent years. 54% of consumers also said that they were now far less willing to invest or lock their money away for a long time.

In the end, the survey made light of a number of issues and gave new insight into how UK consumers are dealing with economic struggles, bankruptcy, and potential debt. Whether these trends continue or teeter off remains to be seen, but increased knowledge is always a good thing for consumers.