New here? Start with these articles to learn about US bankruptcy, debtor bankruptcy
alternatives like debt consolidation, debt settlement, debt negotiation, and debt management.
You'll also learn the causes of debts that can lead you to file bankruptcy and how to recover
from it.Where to Find Debt Management Advice
A debt management plan could help you to make your debts more manageable. It is an agreement between you and your creditors, in which you will make reduced monthly payments towards your debts (based on how much you can afford once your essential commitments have been covered).
Debt management plans have helped many people over the years, but they’re not right for everyone. As with any debt solution, you should contact a professional debt adviser to discuss your options before you consider entering a debt management plan. They will be able to help you understand the pros and cons of a debt management plan, and can advise you on whether it is the right debt solution for you.
Debt management plan: pros and cons
Pros
* More manageable monthly payments. The reduction in your outgoings could make a significant difference to your quality of life - no longer will you have to worry about whether your income will cover all your expenses.
* Interest and other charges may be frozen. This can make a big difference to your ability to repay your debts, as it will mean they cannot grow any bigger.
Cons
* It will take longer to repay your debts. You will still be expected to repay the full amount on a debt management plan, and reducing your monthly payments will mean that this will take longer than it would have if you’d stuck with the original terms (unless your lenders have agreed to reduce or freeze interest and/or charges).
* Your creditors are not obliged to accept the terms. Since it is an informal agreement, your creditors do not have to accept any reduced repayment terms, and they are also within their rights to stop the agreement at any point. However, it is rare that they will do this - after all, creditors would normally prefer to receive their money over a longer period than risk not receiving it at all.
* It can affect your credit rating. Any lender can issue a default notice if you breach the terms of your contract - by making smaller payments, for example.
Is a debt management plan right for me?
It depends on your situation. If you have unmanageable debts, but you feel that you could repay them within a reasonable time period if your payments were reduced, then a debt management plan may be a good idea. However, if you simply cannot see yourself ever being able to repay your debts, then another debt solution such as an IVA (Individual Voluntary Arrangement) or bankruptcy might be more appropriate.
You should always speak to a debt adviser before making any decision. Choosing the right debt solution can be difficult, but an expert debt adviser can explain which debt solution would be most appropriate in your circumstances.
About the Author:
For more debt management advice & information on alternative solutions such as an IVA visit http://www.gregorypennington.com
Melanie Taylor | Debt Management |
Tags: Debt Management
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