Debt Management Firms

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Advice On Debt Management Firms

Serious consumer debt is becoming a big issue for a growing number of people and can dominate your life if you do not take steps to tackle it as soon as possible. Sometimes the situation is made worse by being left while debts continue to build up, but this is often a result of people not being sure what they can do about it. Time is sometimes wasted tinkering around the edges of the problem with efforts to curb spending, but you need to be able to acknowledge when the problem has reached the point at which you have lost the ability to keep on top of payments to your creditors.

Leaving debt problems never solves the issue so you need to take action yourself. That does not mean you need to do everything yourself and have a full understanding of how to tackle the situation, it just means you need to seek appropriate help and advice. You have already taken that first step by searching online for advice, and you can take the next step by taking on board the free assistance offered here.

What Do Debt Management Firms Do?

Debt management firms will provide various solutions to help you get out of debt, but the option most frequently used is a debt management plan. The way this works is that a specialist advisor will approach all of your creditors and try to work out new repayment terms for all of your debts, which make it easier for you to pay back what you owe. When negotiations are complete, you will then make a single, more affordable payment to the debt management firm each month instead of paying all your separate debts.

The advantages being that the repayment amounts are brought within what you can afford and you know exactly when you will be free from debt again. The process of having only a single payment is obviously much easier to keep on top off than lots of individual payments, and the amount you actually pay out each month will be lower too.

Any good debt management firm will first go through your financial situation with you in some detail, before offering you a plan. Some of this can be done in a simple online form when you first contact the company, but they will want to contact you to go through things in more detail. This is essential if they are to give you proper advice based on your actual situation, rather than trying to fit you into some standard solution.

Debt Management Firms – Will I Be Eligible For Help?

Debt management firms will generally offer more than one type of plan to help you. To be eligible for a debt management plan you will normally need to have a certain amount of unsecured debt to at least two or three different creditors. The exact amount of debt you need will vary from firm to firm, but is often around £3,000 or $5,000.

Unsecured debts include most of the common causes of debts such as credit and store cards and personal loans, but not secured debts like mortgages. The other requirement to be eligible for this type of plan is that you have a steady source of income that leaves you enough money available each month to make a reasonable payment towards your debts.

What If My Situation Is Too Serious For A Debt Management Plan?

Good debt management firms in the UK will usually be able to provide a solution for more serious debt situations too. The option that is available only in the UK is called an IVA or individual voluntary arrangement. This is a legally binding agreement that is designed as an alternative to bankruptcy. It is therefore only suitable for very serious situations where you have debts of over £15,000 and are in genuine hardship, struggling to keep up with payments.

While a debt management plan is an informal agreement, the formal nature of the IVA has some advantages. One of the main ones is that if you can get the agreement of creditors for 75% of your debts to sign up for the IVA, any other creditors will have to join in too, even if they do not wish to. This is very useful if any of your creditors are reluctant, so that all your debts can be included in the agreement.

The way an IVA works is that you have to make a regular monthly payment into the IVA, which is shared among your creditors. This payment is based on what you can actually afford, so will certainly be less than your creditors would otherwise want. You keep making these payments for the term of the IVA (usually five years) and at the end of that period any debts left unpaid are written off. For some people this can mean having up to 75% of their debts wiped out. This is what makes it possible for an IVA to deal with debts that you could otherwise never hope to repay in full.

Find out more about IVA debts and go to the list of IVA Suppliers

For US residents the nearest equivalent to an IVA is debt settlement, which also involves writing off a portion of debt in order to make it possible to repay the balance. Find out more on the main Debt Settlement page.

Finding Reputable Debt Management Firms

I cannot stress how important it is to find a reputable and established company to deal with. Many people are taken advantage of each year by organisations that are only interested in exploiting their desperation by signing them up for inappropriate plans that include hefty fees for them. If you stick to well established and regulated companies with a good track record you will be sure of getting honest advice in the first place, which is essential to finding the right solutions for your particular circumstances.

Shopping around is always a good idea and the safest approach is to apply to a few companies that are known to be reputable and see what you get back. Applying online is fast, easy and free and commits you to nothing at all. You will normally just complete a simple form and then a debt advisor will contact you by telephone to go through your situation in more depth.

You can find a list of some of the most reputable Debt Management Companies in the UK and the US on the main Debt Management page of this site.

residents can apply for a debt management plan or an IVA by completing the form at the bottom of this page.

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Advice On Using Debt Management Firms