Debt Management for Everyone

When it comes to debt management it is more about your actual ability to pay the debt than the amount of debt you hold. There are debt management plans for those in any debt tier.

What is a debt management plan?

A debt management plan is an agreement with a creditor to consolidate and possibly lower monthly payments to get a debt paid down. The amount of the payment to the creditor is based on how much the debtor can afford to pay monthly.

Debt management plans are often created by companies that specialize in the field because it can be time consuming for an individual to come up with the plan on their own and actually be able to convince a creditor to consolidate payments.

Consolidating and reducing payments does mean that the debtor will be paying the debt off for a longer amount of time, however, it also means that the debtor will be able to pay the debt in full and hopefully escape any negative impact on their credit score associated with defaulting on any unsecured debts.

If you’re considering a debt management plan, you shouldn’t worry about whether you have too much or too little debt because the amount of debt you have doesn’t have as much to do with a debt management plan as you actual ability to repay the debts.

Of course, with stipulations like this many people will be filing for bankruptcy rather than solving their debt problems. R3, an insolvency trade body, said that personal bankruptcy filings will reach a peak of 158,820 by the end of the year. This number totals out to about 435 people filing bankruptcy or entering an Individual Voluntary Agreement daily.

These statistics aren’t helped by the number of unemployed Great Britain is expected to have by the end of 2009…2.9 million according to the Confederation of British Industry. In the past (and sometimes now) the unemployed families are finding that they are digging themselves further and further into debt by buying every day essentials like food and paying the utilities just because they are buying these items on credit. What money they are making is likely not going to paying off credit cards or other debt obligations.

While some debt solutions are not available to families that are strapped for cash, there are still many solutions available. Debt Management Plans can be suitable for families with smaller debt loads, however this is not a legal binding agreement. Individual Voluntary Agreements require the debtor to have over £15,000 in unsecured debts owed to three or more creditors, but they have to have a regular income to be eligible. At the same time, many people are finding themselves unable to negotiate wages due to high unemployment (employers currently have the ball in their court). So those who may not be able to pay down their debt, but still have a job will be able to use the IVA .

Of course, there is a large group of people where bankruptcy remains the only real option when it comes to their debt woes.

If you know someone who is looking into filing for bankruptcy protection, be a friend and make sure they know all the real issues associated with such a harsh financial decision. A bankruptcy filing will follow them for at least seven years on their credit report and will make it very difficult to get credit for any purchase they may want to make.

Source:
http://www.debtfreedirect.co.uk/news/NewsUnemployementAffectsFamiliesFinance/