Debt management firms may be able to write off debt
June 2, 2008
As most people are aware the level of personal debt amongst consumers in the UK is very high, and with borrowing costs rising, the cost of living on the up, and increases in a range of bills, many households have found themselves facing severe financial strains over recent months. As a result of this an increasing number of consumers are looking for ways to try and ease their financial problems, and those with a high level of debt have found themselves having to look at various solutions in order to be able to stay afloat financially.
There are a number of options that consumers can look at if they wish to try and find a solution to deal with their debt problems. This includes coming to an informal agreement with creditors, consolidating to a single, more affordable loan, or opting for more drastic action such as bankruptcy or an Individual Voluntary Arrangement. Another option is to go through a debt management agency or charity, and enter into a debt management plan.
With a debt management plan the agency or charity goes through your income and outgoings in order to determine how much you can realistically afford to repay on your unsecured debts. You then pay a set amount to the debt agency or charity, and this amount is distributed on a pro rata basis amongst your creditors. You continue to make these repayments until the debts have been cleared, which means that in some cases you could be repaying your debts for years or even decades.
In the past some people have experiences stress and problems with these plans, usually as a result of the creditor refusing to accept a repayment schedule. However, new regulations have resulted in some changes that could help to ease these issues. Under the new regulations these debt management firms and charities may be able to write off a portion of the debt owed by their clients, even if the creditors object to them doing this.
Even better news for those on debt management plans is that the debt management firms and agencies may now also be able to enforce structure repayments plans on behalf of clients, which the creditors will not be able to argue with or refuse to accept, and this could make the whole process faster, smoother, and simpler. With around seventy thousand people through to be on debt management plans this could help many people to ease their debt problems. Changes have also been made to stop utility firms from cutting off supplies when people are in these plans, and to stop creditors from forcing someone in a debt management plan into bankruptcy.
One official from the Justice Ministry said: ‘Such schemes depend on the voluntary participation of the debtor and creditors and operate without any form of regulation. There is currently no power to compel creditors to adhere to the terms of a debt repayment plan.’
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