Debt Management Plan

This involves negotiating an affordable repayment plan with all your creditors in order to buy some time until full repayments can be made or another solution can be found.

Strengths: Allows some financial breathing space and generally stops creditor letters and telephone calls. Allows time for another solution to be proposed and keeps down monthly expenditure. It is a simple procedure to set up.

Weaknesses: Interest on some accounts in arrears may continue to accrue; your credit rating, as with any debt solution, will be affected; the debt will be repaid over a much longer period of time, even years, if no other solution is followed. Creditors may use aggressive tactics at any stage. If in a debt management plan longer term, periodically payments will be reviewed and possibly increased: is better used as a temporary rather than fixed term solution in view of the weaknesses.

Real life story

Debt Management Plan

Mr T used credit cards and took out loans in excess of £50,000 to support his business and his son’s career in sport. After separating from his wife he neglected his business for several months and found himself unable to keep up with repayments and needed advice on managing his financial commitments until he was able to bring his business back on track.

A recommendation led him to debtDr who immediately put him into a debt management plan in order to relieve some of the immediate creditor pressure he was under. Mr T has been in the plan for 6 months and after a review of the plan and his business, debtDr and Mr T have decided to continue with the plan for another 6 months in order to see what position he is in with the business. If in 6 months time it is financially viable, he will be looking into entering an IVA as there is no equity in order to raise a lump sum for either a single payment IVA or short settlement; he can also remain as company director. If his business income prohibits him from entering an IVA, he will be looking for us to support him through bankruptcy and advising him on the options available to keep trading and keep his property.

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