Companies that help manage debt?

[punyXpress]

A lot of these ' consolidation ' merchants seem on a par with the ' buy your old gold ' people. They come out of the woodwork when times are hard and look on those with mountains of debt as east prey.
TimWilky was right saying the miseries excessive debt causes but he missed out the biggest one - the toxic debt encoraged by Tony & Gordon. We and our children / grandchildren will be paying THAT ONE off for decades!

Originally Posted by ceeshaw

I offered one of my staff (a single mum) more hours. She worked out that the extra money she would earn would mean she received less benefit to the point where she'd be working more hours for the same money??!!!

She declined my offer. Can't say I'd blame her. Sorry, gone a bit off-thread here!! She was great though - some of my best staff have been single Mum's.

My position exactly - i could work 15 hours a week and be only £20 better off - would you?

I act for one such client. She got into serious debt on credit cards: the reasons are irrelevant but suffice to say it wasn't through living a luxury lifestyle. As Claire suggests, this lady was out of her mind with worry, she thought she was about to lose her home, and the doc had given her citalopram.

On my advice she has sacked the debt management company (which also charged 20%) and she has appointed me as her debt agent. Do remember that debt management companies are unregulated. Creditors tend to listen to a solicitor, and I think that I have achieved a much better solution for her. She will be out of debt in 4 years, not 9. I am not charging her - there are good reasons for this - in fact I was pleased to help.

My client was not too stupid to manage her own way out. The real problem was that she was so worried she couldn't see the way out. She struggled and struggled, and it took quite a while to make her realise that compared to some of the people I act for, she wasn't that bad.

I mention some I act for - I have another client, a self employed builder, who owes slightly over £100K on credit cards. Yes - £100K. And he has no means of paying it as he has no work. I'm helping him with this, too.

On balance, these companies probably do a useful function, but I see so much of this sort of thing, I can't stand people who prey on the vulnerable.

Ed

Originally Posted by Dave20046

I would look to the government/charities rather than on eof these 'debt consolidation companies'
...

Like these? http://www.cccs.co.uk/Home.aspx

[hindle8907]

they just get you in more debt i would think by spreading the payments over 10000 months lol.

[Sir Trev]

I rate these debt management companies in the same bracket as ambulance chasing "xx4u" type companies. (I won't call them solicitors as it's not right to tar someone like Ed with thier tainted brush). A lot of them are in it for themselves and make a LOT of money from misery.

It's true that some of them may be good at bargaining with your creditors on your behalf and for people less confident than KJ they may be a good way forward. However you would probably get better and much cheaper advice from an indepentant financial advisor (IFA). They would charge a consultation fee and work out a better debt vehicle for you, such as a single loan with sensible rate to stop the worry factor, and advise on how to help yourself. As they make commission on the new policies you take to replace the (probably poorly planned) old ones it will not cost anything like 20%.

Originally Posted by Speedy Claire

Sorry Thulfi but my comments weren`t directed at you... more to those who consider people "stupid" for having got into debt

SC, i agree with you...I have quite a bit of debt. Its a student debt, so sort of acceptable (its not like I brought loads of things on a credit card that have now been thrown away!) but even so, debt is debt. Somethings you can't help getting to debt for - buying a house, going to university, bringing up children.

The debt managment companies may end up costing someone more, but if you can only afford to pay a little bit of money at a time (because you get wages in a trickle innit) then it does make things easier. The extra money you have after you've paid for everything else can be put away, and at the end of the year or whateer, you might have a tidy little sum to pay off an extra portion of the debt (if that is allowed)

[Viney]

Originally Posted by thulfi

Not that I'm in any thankfully or looking for one.

It's just I saw an advert for a 'debt helping' company, which seems to help you consolidate your payments, blah blah.

I don't know anything about these to be frank, but I can imagine them screwing someone over even more, and them making money, because why else would they exist?

Anyone know how these companies even make their money?

I can speak from personal expierence. There are 4 types of 'debt management'. One is these companies as you say who consolodate your loans over a 25 year period. However you can only do this if you have a home. It ends up costing just as much if not more. Then you have Debt management. This is where you pay a fee and a good salesman phone up your creditors and say that you cant pay and arrange for a payment plan. The cridtors can still call in thier debt as and when they feel like it and take you to court and all manner of things. Then there is an IVA (Which im in) This is backed by government legislation. Its a proper insolvancy practitioner that handles this. They contact your creditors say that you cant pay. If over half agree to the plan, then the ohter 50% are bound by law to comply. A payment plan, based on your income is worked out over a 60 month period, the creditors then have to make a claim on it. They stop all the interest, so all you pay is the capital back, and this, and in my case, equates to 30%. Then there is Bankruptcy.

Was i stupid to get into debt, yes of course, but it is a never ending spiral one that i seriously couldnt see the end of. I was paying out 85% of my salary on cards and loans. I have been in 'debt' since i was 18 and my 1st car. What have i to show for a very considerable amount of money, naff all. The only thing that i have owned outright from the day i bought it is the bike. Woudl i get in debt again, yes probably, this time though it will be a house and never ever ever have another credit/store card as long as i shall live. Living with just the cash in my pocket with no overdraft, or cards to fall back on, puts things into perspective thats for sure.

[Drew Carey]

Thought I would give my view on this. I am one of these so called "stupid" people.

Over a period of 5-6 years starting in 1999, I got into a lot of debt, to the tune of approx £20k. I am not going into how / why this occured and I regret every penny of it, but it happened and I have dealt with it.

For many years I was servicing the debt, but it slowly got out of control, it came to fruition one day as I did honestly felt like suicide might be the only option. I was getting threatening letters from all sorts of debt collection people etc. This all occured at the same time as splitting up with my Ex and then having to relocate because of it all. I felt, at the time, that I couldn't deal with it at all.

I contacted Baines & Ernst, who went through everything with me. They reassured me, they spoke to me like a human, not just a statistic. Now I know it was only "sales" talk, but it was what I needed to hear at the time. In return for their service I paid them a fee of 8%. We went through my finances, they allocated spending money in the budget and came up with a sensible figure. They then did all the talking with all the creditors etc and helped no end. One of the main ways they helped, is that you no longer have to worry about speaking with all the different creditors. When you moved address, B&E dealt with the change in details with them all. I had a total of 8 creditors, so it made the process much easier.

Moving forward to now.....3 or so years ago, I decided to do it on my own. However, one thing was certain, for a small fee, which 8% I think is reasonable, B&E had agreed all back charges, all interest, all fees were scrapped on all my debts. So immediately it meant that the 8% was worth paying. Secondly, most defaults were removed by the creditors as part of the agreement. This basically meant that for the fee, that saved me money in the long term, the DMC had done all the work for me, so that when I decided to go it alone, I simply called each creditor, informed them of the change and all is now happy and rosey. I now contact them every 6 months and simply give them an update. When one debt finishes, the money from that simply gets rolled into one of the others.

From an initial debt of nearly £20k, I am now down to approx £4k, its all still interest free and all still at an amount that I can afford to pay.

So even though I am no longer with them, some debt management firms are good and some do help......in the short term. Agreed, in the long term do it yourself.....but why not get the clout of the DMC to do the donkey work for you to start with. Getting into debt was my own fault and even though I have family etc that could afford to bail me out, I want to pay this all off myself and want to get square. In the beginning though, I felt I could never see the light at the end of the tunnel......but when in the position I was, the DMC was brilliant.

(One word of warning though.......agree that there are now charities that will help you do this etc......however, when I started out I was not aware of them. So I would suggest people use charitable DMC rather than commercial.)

[Dave20046]

moneysavingsexpert and the mse forums have a lot of debt fighting stuff anyone reading might find helpful.