Debt Management Counselling

Debt Management Counselling Tips And Advice

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Debt Management Counselling – Where To Start

Anyone experiencing problems managing mounting debt can benefit from debt management counselling. You have already made the most important decision, which is to seek help to deal with your problem and get back to a debt free life, but the next important decision you need to make is where to go for help. This decision is crucial because it is essential that you get sound advice, and this may not be what you get if you do not approach reputable companies.

As with searching for anything else, it pays to shop around before making a decision. Other websites will not tell you that, because they are only promoting their own services so they want to you to just choose them. I do not provide any product or service so just want you to avoid those companies that would try to steer you into a plan that makes lots of money from them, but does not necessarily get you out of debt.

So my advice is to apply to a few different debt management counsellors, that are known to be reputable. You can do this quickly and easily online. An experienced debt counsellor will than get back to you to go through your finances in detail, so that a solution can be found that addresses your particular situation. There is a list of some of the leading and most reliable debt management companies on the main Debt Management page of this website.

Debt Management Counselling – What Are The Options?

Before you approach any debt management counselling experts, it is useful to have an understanding of what they can actually do for you and what you might expect. In the UK the main solutions used to tackle debt problems are debt management plans (DMPs) and individual voluntary arrangements (IVAs). The option you go for, if any, will depend on the details of your situation. The most common route out of debt is a DMP, but if your situation is very serious, to the point where you are perhaps considering bankruptcy, an IVA may be the better option.

Debt Management Counselling – Using Debt Management Plans

This most common form of debt management counselling is essentially a way of restructuring your debts to make the repayments more manageable. The counsellor will negotiate with all of your creditors to change the terms of your debt repayment. This may involve reducing interest charges and even writing off penalty fees and late payment charges, etc. The net result of these negotiations are that you end up making only one affordable monthly payment to the debt management counsellor instead of paying all your separate debts.

The primary benefits being that your monthly outgoings are reduced and the effort involved in juggling all your different repayments is eliminated. A good debt management counselling company may also offer some help and advice with money management and budgeting to ensure that you can avoid getting into a similar situation again.

DMPs are informal agreements so they are relatively easy to get out of if you change you mind or if your circumstances change. This informality does, however, mean that you cannot force any creditors to join the plan if they do not wish to. For a DMP to work you will need to have a fair amount of unsecured debt to a few different creditors and you must have a source of income that leaves you enough free each month to go towards a reasonable monthly payment.

Debt Management Counselling – Using An IVA

If you find you are not eligible for a DMP, perhaps because your income is too small in relation to your debts, you may be able to benefit from an individual voluntary arrangement. The difference between this and a DMP is that it is a formal and legally binding agreement and it usually involves actually writing off part of your debt. When your financial situation is so bad that you could never hope to repay all of your debts in a reasonable time, an IVA is a way of paying some of your debt back and writing off the rest.

When a debt management counselling organisation assesses your financial situation, they will be able to tell whether you are more suitable for a DMP or an IVA. An IVA sounds attractive because it involves writing off debt, but you cannot set up an IVA just because you would like to. They will only work if most of your creditors agree, and they are unlikely to do so if they can see that you could actually afford to pay them back in full. For an IVA to be offered, therefore, you must be in genuine hardship and possibly facing bankruptcy as the only other alternative. If a creditor can see that you may go bankrupt and leave them with nothing, then an IVA will look like a better option because they will at least get something back.

When you set up an individual voluntary arrangement you agree to make a regular monthly payment (based on what you can afford) towards your debts for up to five years, and at the end of this time any debts left unpaid are written off. Many debt management counsellors offering IVAs will say you can write off 75% of your debts, but about half is much more common.

Another benefit of an IVA is that if you can get creditors for at least 75% of your debts to agree to it, then the IVA can be set up for all your creditors, whether the rest want to or not. This is a big advantage over a DMP when you are faced with one or two creditors who do not want to play ball.

Debt Management Counsellor – Recommended Organisations

As mentioned earlier, the decision you make about which company to use is a very important one and can affect whether you ultimately manage to get out of debt, and how long it takes to do so. Apply to a few reputable companies and compare the advice and recommendations you get back. The safest approach is to follow recommendations to make sure you steer clear of any companies that may not be tried and tested.

Find recommendations for some of the best Debt Management Counselling Organisations on the main Debt Management page of this site.

Alternatively, complete the form at the bottom of this page for a review by our highly recommended debt management counselling company.

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