Debt Advice: Debt Management
If you?re unable to keep repaying your debt at its current level, then the best thing to do is to get in touch with a company that offers free debt advice. One of the options they will probably tell you about are debt management plans.
What?s a Debt Management Plan?
It sounds as if it should be any way that you manage your debt, but it is actually the name for a specific type of debt solution. In this case it involves having a third party negotiating with your creditors for you, trying to get them to accept reduced payments each month.
This is a totally informal arrangement which you enter in to with your creditors, so they have no obligation to accept. They can also pull out of it at any time, but they usually don?t as long as you keep up with your payments.
The way it works is that you will sort out with the debt management company how much you can afford to pay each month towards your debt. They will take this to your creditors, and they can either agree to this or not. The reason they usually do agree is that otherwise you may have to stop making payments all together and they would have to take legal action which would probably result in them receiving reduced payments in any case.
It should be noted that this refers to your unsecured debt. Any creditor that you have got a secured debt from will probably not accept reduced payments as they have a claim on your property if you do not keep paying them what was originally agreed. They can therefore get their money back that way.
Lenders of unsecured debt do not have that option of course, to lay claim to your property if you do not pay them. That doesn?t mean that you can simply decide to stop paying though as they can take legal action, and if you don?t pay what the court tells you you have to then they may be able to take your property.
Alternative Debt Solutions
There are a number of different ways that you can deal with a debt problem of course, a debt management plan being just one of them. When you get in touch with a company for debt advice, they will be able to tell you about a number of other ones as well.
If you can?t get all of your creditors to agree to receiving reduced payments, then an IVA may be appropriate. In that case only 75% of them have to agree. And then after 5 years, what you haven?t been able to pay will be written off by your creditors.
What most people immediately think about, and fear, is the prospect of being declared bankrupt due to the amount of debt that they owe. Indeed, it may well be feared as there are a number of negative consequences, although your debt will be written off.
A few of the many issues to do with bankruptcy are that it is expensive, you could lose your property and you may lose your job as a result of it. You?ll only lose your job if you are something like a company director, or you are handling finances as a large part of it. Just the expense alone puts many people off though, it costs over 700.
If you cannot afford to make payments on your unsecured debt anymore and you don?t own your own home, then one of the best pieces of debt advice is to apply for a debt relief order. With one of these, your debt is immediately frozen and you don?t have to make any more payments on it for a year. If you still can?t afford to make payments after a year, it is written off altogether.
To find additional advice regarding ways to make use of debt advice, go to the place where author Jamie Cook also regularly is found writing at: http://www.debtadvice.net.
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Source: http://financehelpnews.com/business-finance/debt-advice-debt-management
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