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Debt Management, is there a better option for me?

Debt Management, is there a better option for me?

Debt Management, is there a better option for me?

This article is to help those considering, or already on, a Debt Management type arrangement.

Firstly, some information about the current Debt Management industry

A Debt Management Plan is a good financial solution and we offer them, but like most things – there are advantages, disadvantages and also suitability which need to be fully assessed weighed and up amongst all the options available to you.

Unfortunately, many firms offering debt assistance products are not licensed to offer all arrangements, or even allowed to advise on them. This limits the options you may be aware of, and ultimately you could sign up to something unsuitable. Some people consider this as mis-selling, but we would always recommend you explore all options available and not go off the guidance of one person, no matter how reassuring they come across – after-all they are effectively sales persons.

Alternatively, In an age of businesses referring contacts as commission commodities, you may also find that although a firm may not be allowed to advise on schemes more suitable, you could be passed onto a unfamiliar firm that can. Or worse, entered into a tele-marketing database and sold onto several firms, including non-related products like the annoying PPI or injury claims calls sales campaigns.

It is worth noting that a Debt Management Plan (DMP) could have different name variations due to the relaxed regulations and conformity of that arrangement (the same reason why some many firms are able to offer and advise on it!). Financial Management Plan (FMP) is common distinct alternative name but they are identical arrangements. It is a common sales approach for firms to seem to offer something different or unique to the competition.

At Lawson Fox Debt Solutions, we are an Insolvency Practice, with Insolvency Practitioners licensed by the Institute of Chartered Accountants in England and Wales and a member of the Association of Business Recovery Professionals. We are a limited company and what you read here is not masquerading under hidden identities like many sites out there. If you contact us, you will speak to our own experienced advisers and your details are in safe hands.

Now you know who we are and how we differ, let’s give you some impartial help…

Is there a better option for me?

If you are already on a Debt Management arrangement (DMP) you should have been given an expected term for which the arrangement would run until all your debts have been cleared. If this is over ten years, then it is very likely that it is the wrong solution for you, and between six and ten years worth exploring further.

If you unfamiliar with the DMP arrangement (or appreciate a quick summary); a DMP helps you reduce what you have to repay to a more affordable amount. A DMP doesn’t write-off any debt, so reducing payments will extend the total time it takes to pay off the balances. The DMP provider should try to freeze interest and fees, but the creditor (who you owe) has no obligation to do so. A DMP offers no protection to you or your assets (consider your house if you are a home-owner!). Should a creditor become unsatisfied with an arrangement, they are entitled to take further action at any time, which could include court action, bailiffs, a charge on property or bankruptcy petition.

From this brief overview you can approximately assess under a DMP:

  • The total amount to repay: All your balances in full, plus possible management fees and creditor interest.
  • How long the arrangement will run: Your total balances divided by what you can afford per month, in months.
  • Do you have any substantial asset concerns?: A home with equity that could interest your creditors.

So, if a DMP is likely to take over ten years then it is very likely that that same affordable payment amount would be better suited for an Individual Voluntary Arrangement (IVA). An IVA is a scheme introduced by the government to help those in serious debt. It is a heavily regulated scheme only administered by licensed Insolvency Practices like Lawson Fox.

With regards to what you pay back, Unlike a DMP, an IVA duration is capped to 5 (or 6 years should you have equity in a property), so you can work out approximately how much you would pay back in total. Once complete, the remainder is written-off and your debts guaranteed to be cleared.

If there’s a considerable difference between maintaining an affordable payment amount for 5-6 years, and the estimate to fully repay your total balances, then get in touch.

Try our Quick Calculator. – It will give a good indication of the outcome of your options.

Can I switch form a Debt Management to an IVA?
Don’t worry if you are in an existing arrangement you you now feel is unsuitable. Debt Management arrangements are informal and although the managing firm may put up some resistance, we can help take care of that pressure. We are experts in helping those who are in that very situation.

There are some particular criteria and considerations for an IVA that we will need to discuss with you, but when it is suitable, you may find that not only can you write-off some of your debts and get debt-free quicker, but there are other distinct advantages which other solutions can not offer. Such as:

  • legally protecting your home and assets
  • legally guaranteeing that the creditors cannot take further action. Threats, bailiffs, property charges etc

An IVA can give both you and your family peace of mind.

As you can see, the arrangement we offer has legal backing. That is where we come in, unlike other solutions and IVA can only be administered by a regulated and licensed Insolvency practitioner. Citizens Advice routinely direct suitable people to Insolvency practices, we are the the only organisations able to offer further advice on IVAs.

Avoid the unregulated firms and call centres that frequently hit the news for the wrong reasons and get good, impartial advice from us now, before your situation becomes out of hand.

Do you qualify for an IVA? Would you like some free advice?

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