Companies that help manage debt?

[Drew Carey]

To back up what Viney has said, please DONT confuse debt consolidation LOANS with traditional debt management.

Traditional debt management stops all interest and fees etc. So the debt does NOT grow. You then pay it back over an agreed period of time at an agreed rate.

The debt management loans are crazy, as they simply take the debt and restructure it against property, such as a house and usually with massive amounts of interest over very long periods of time.

Originally Posted by Speedy Claire

They put you on a debt management program, you provide a list of the companies you owe money and from that a payment is worked out which you pay to the debt management company. They then approach the companis with an offer of a small but regular monthly payment, the debt management company will keep a percentage of what you pay them so say, for example, you pay the DMC £100 a month they keep the first £20 and then divide the remaining £80 between your Creditors.

They also talk to your creditors and negotiate repayment terms. Generally, this is a waste of time as most of these plans fail, as you have to sacrifice a lot. Eg the DMC will sit down with you and go through your income/expenditure. Your creditors do not have to agree to any plan they propose.

Essentially, a Debt management plan is an unofficial IVA. The DMC will write to your creditors with a proposal for the amounts you can pay over what period etc and then you pay it.

As far as I'm aware it is not legally binding (I can check this if you really need to know - PM me) and as such the companies can change their mind on the amounts they want. Although I can't remember if that is purely for other informal arrangements.

Just as an aside; I work in insolvency (for the official receiver) and so if anyone wants any information of advice you're more than welcome (confidential of course).

[Drew Carey]

Originally Posted by EssexDave

They also talk to your creditors and negotiate repayment terms. Generally, this is a waste of time as most of these plans fail, as you have to sacrifice a lot. Eg the DMC will sit down with you and go through your income/expenditure. Your creditors do not have to agree to any plan they propose.

Essentially, a Debt management plan is an unofficial IVA. The DMC will write to your creditors with a proposal for the amounts you can pay over what period etc and then you pay it.

As far as I'm aware it is not legally binding (I can check this if you really need to know - PM me) and as such the companies can change their mind on the amounts they want. Although I can't remember if that is purely for other informal arrangements.

Just as an aside; I work in insolvency (for the official receiver) and so if anyone wants any information of advice you're more than welcome (confidential of course).

Correct, the agreement is not legally binding (whereas an IVA is). However, the creditors tend to agree to your payments providing they don't breach their minimu limits. This is the amount that the creditor would require as a minimum; these tend to be much lower than you think. For example, one creditor I contacted recently, who I am paying £39 per month too, explained, "No worries, your payments are all fine and in fact you could drop it to £11 per month if you had issues." The figures are usually based on the amunt outstanding aand what they consider the maximum amount of time remaining.

I also found that when going through the budget etc they were very realistic as to what spending monies would be required etc. The plans DO work, but not for everyone.

[Viney]

Essex, no a std DMC agreement isnt legaly binding. it was one of the things that made me go the IVA route. The creditors can change thier mind at any time. Debt is so just damn east to get out of control. Anyone who says it stupid must be VERY diciplined with thier money or earn enough not to go the debt route. My misshappenings were in excess of £50k! I have 19 payments and i shall be debt free for the 1st time in 20 years! Party on that day i can tell ya

Originally Posted by Viney

Essex, no a std DMC agreement isnt legaly binding. it was one of the things that made me go the IVA route. The creditors can change thier mind at any time. Debt is so just damn east to get out of control. Anyone who says it stupid must be VERY diciplined with thier money or earn enough not to go the debt route. My misshappenings were in excess of £50k!

Pretty much the same boat as me Viney, mine were in excess of £42k and I was paying over £1100/month back on loans/CCards which was only really paying off the interest. I think I calculated that it would have taken me over 20 years to pay back.......

....or take out an IVA which reduced my monthly payments to £350/month over 5 years, then I'm debt free. The IVA only stays on your credit record for a total of 6 years too so not a major issue.

One thing I do know is that I'll never ever have a credit card again and I only buy stuff now that I save up for. It's satisfying knowing that everything I've got is owned by me and not some bank.

Only 14 months to go in my IVA then I'm free.

If you're in more than £20k debt then taking out an IVA is kind of a no brainer, and I wouldn't touch a debt management loan again with a barge pole, been there, done that.

Funnily enough my office is one floor below the Insolvency Service in London

I was having a discussion yesterday where the amount of debt came up. To me, personally, £20k is a phenominal amount of debt. However, I've started to become numb to it, as daily I deal with people well over £100k debts.

Debt is a real problem, and half of the problem is the institutions that are willing to offer people money who are already in serious financial difficulty. Payday loans at 2000%apr which they have no prospect of paying off in the short term given.

But yes, creditors would rather you pay them something than go bankrupt in which they generally lose everything. (Official Receivers' fee is £1715) and most people going bankrupt do not have enough assets to cover that + agents fees + a resonable distribution

Originally Posted by Davies

Funnily enough my office is one floor below the Insolvency Service in London

Bloomsbury street?

[timwilky]

Yes, I say debt is stupid, I grew up in an age when if you want something you save up for it. A letter from the bank managers would be something to fear.

As I said earlier, I saw the misery my brother went through when he had his house repossessed. I was always determined never to be in a situation where I placed myself or my family at risk.

I have once had to take out a bank loan to buy a car. The conditions that the bank lending officer imposed would these days be illegal. You cannot have the loan unless you take out our insurance policy on it etc. These days credit is easy, too easy.

I know damm well that people suddenly find themselves in changed situations. My own son is a very good example. But far too many seem to think they can borrow their way out of trouble.

I am not disciplined. I make far too many spur of the moment purchases. I want a new bike, guess what I am saving for it.

Originally Posted by EssexDave

Bloomsbury street?

Indeed!

Originally Posted by Davies

Indeed!

Do you ride to work? I was there a couple of weeks ago. Nice building.
Gotta go to holloway next week for some training. Fun...