Struggling With Debt, Have You Considered Debt Management?
If you are struggling with unmanageable levels of debt, a debt management plan could reduce your monthly outgoings and make your debts manageable again.
However, as with any debt solution, there are a number of things you should consider before entering into a debt management plan.
How debt management works
A debt management plan is an informal arrangement with your creditors in which you will (if they agree to it) repay your debts in smaller monthly amounts, based on how much you can afford.
Those smaller monthly payments will mean that you will be repaying the debt for longer (and may pay more in total, due to interest), but for most people, the most important factor is the fact that their monthly payments are manageable again - this can be a ‘lifeline’ for people who are unable to make their existing repayments.
As well as a reduction in monthly payments, it may also be possible to negotiate a reduction or a freeze in interest and/or charges. This can prevent the debt from growing any bigger.
Is debt management right for me?
This will depend on your level of debt, as well as your personal circumstances.
In general, a debt management plan is useful for people who can no longer afford to repay their debts under the existing terms, but feel they would be able to repay them over a longer (but still realistic) period of time.
A lot of people are worried that their lenders will not accept a change in the repayment terms, but most lenders will do so if it is clear to them that the debt management plan is your best chance of repaying the debt in full.
If you are not sure whether you will be able to repay your entire debt - or if you think it would simply take too long to do so - it may be worth considering another debt solution.
What other debt solutions should I consider?
If you don’t think a debt management plan will help you, there are other debt solutions that could help you to clear your debts. For example…
IVA (Individual Voluntary Arrangement)
An IVA is a formal agreement with your unsecured lenders. If enough of them agree to the terms, you will pay off a percentage of your debt over a fixed period (normally 5 years), and write off the rest.
An IVA can help you to avoid bankruptcy, but it will require you to make regular monthly payments for the duration of the IVA. As well as this, you will be expected to give up some of any increase in earnings (e.g. salary rises, bonuses, etc.) while the IVA is running. And if you are a homeowner, you may be required to release some of the equity in your home in the 54th month of the IVA (half way through the final year).
But remember: if you are unable to commit to regular monthly payments, then an IVA is also unlikely to be suitable. If you’re unsure, speak to a debt adviser.
Bankruptcy
Bankruptcy is widely considered to be the last resort for people struggling with unmanageable debts, but in some cases it can be the most suitable option.
On the one hand, bankruptcy proceedings are usually over within a year. Once this has passed, you will be legally debt-free, and will not be pursued by any creditors.
On the other hand, if you own your home it will almost certainly be sold, and you will unable to obtain more than £500 of credit without declaring your bankruptcy until you have been discharged. Plus, you will most likely experience difficulty obtaining credit as your bankruptcy would stay on your credit report for six years (as would an IVA or a debt management plan).
For more advice with debt management & further debt help, visit Gregory Pennington. Article Source:http://www.articlesbase.com/debt-consolidation-articles/struggling-with-debt-have-you-considered-debt-management-937965.html
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