Debt Management Plans – What Are They?

If you find yourself in serious financial trouble, the idea of bankruptcy may seem like a viable option. After all, isn’t it a way of effectively clearing your debts and wiping the slate clean? The answer is that although it may be a route of last resort for some people, it really isn’t a sensible option for most. This is because bankruptcy has severe and long lasting consequences. For example, you would face losing your home and any other assets of value. You wouldn’t be able to work in certain jobs such as local or national government offices, the police and the armed forces. And to top it all, your credit reference file would flag up ‘bankrupt’ for six years. A far better option is to consider a debt management plan.

With a free debt management plan, you’re given a route out of your debt that for most people will be much better than bankruptcy. It’s a way of ridding yourself of that constant nagging worry of dealing with each of your creditors and an end to the struggle of trying to keep all of them off your back. Being in serious debt doesn’t necessarily mean you’ve been irresponsible with your financial affairs. There are many devastating events that can have a serious negative impact on you, both psychologically and financially, such as divorce or separation, losing your job or suffering a serious illness.

When you’re struggling to pay for day to day living, let alone managing to keep up with loan and credit card repayments, life can seem very dark indeed. The interest just seems to pile up each month and if you miss any payments there’s the added hassle of penalty fees. Sometimes you end up borrowing more money in an attempt to pay off existing debts. The spiral of debt soon escalates and to many, it seems inescapable.

Using a reputable company to set up a free debt management plan will let you take control and start to get things back on track in your life. They will deal with each of your creditors for you and make realistic arrangements for you to pay back what you owe. You’ll no longer have to make lots of payments to different creditors. Everything will be consolidated into one payment to your debt management company. They will then divide this up and make pro rata payments to your creditors.

You will be able to make this payment either monthly or weekly, depending on how often you receive your income and it will of course be set at an affordable level. You will be allowed a realistic amount of money in order to pay for essentials such as mortgage or rent, utility bills and food.

In many cases the debt management company will be able to negotiate a freeze on interest rates and charges with your creditors. Success in this isn’t guaranteed, but because they have good relationships across the credit sector, debt management companies are in an excellent position to undertake these discussions on your behalf.

Another benefit is that you will always be able to call on friendly and expert staff for advice and support throughout the lifetime of your debt management scheme. They can give you a date, by which you will have cleared all your debts and this knowledge is a great encouragement and incentive for many people.

When you’re looking at companies who can offer you a debt management plan, there are some things you should bear in mind. Check whether the company will charge you for setting up the plan, or will expect you to pay a monthly fee. Some do, but it’s a good idea to look for one that won’t put these extra costs on your shoulders. Another feature that many people find extremely useful is the ability to track their payments online. It’s very satisfying to be able to see your debt go down and the pro-rata payments that have been made to each of your creditors.

Want to find out more about debt management plans, then visit Harry Whitehome’s site on getting the best advice on debt for you.