What To Know About Taking Out A Debt Management Plan

21 May 2015
 Categories: , Blog

Many people, although not destitute, have built up debts over the years that affect the amount of money they have available after all the debts have been paid. Sometimes, it can get to a stage where a person cannot afford to pay all of their debts on a monthly (or weekly) basis. This means that a person is juggling their debts about; delaying paying one debt one month, then paying the next month, and so on. As this is very stressful, some people may be considering a debt management plan. Take a look in detail at what a debt management plan is, and what it would involve should you decide to take one out.

The Plan Is An Agreement

A debt management plan is, in actuality, an agreement between you and all of your creditors, which is mediated by a debt management plan company. Your creditors are approached by the company and asked to enter into an agreement, with all of your other creditors, whereby a bank account is created for you to deposit money in on a regular basis. An equal share of this money is sent to each of your creditors. Two important things to remember is that you will have to pay a debt company to approach your creditors with the plan, and any one of your creditors can refuse to agree. However, as you are making an offer, it is likely they will accept it; if it went to Court, they would have to explain why they were refusing money from you.

Your Information

If you choose to take out a debt management plan, you will have to be ready to provide some personal information. In order to make a binding agreement, the debt management company will require you to supply the following:

  • Your income
  • Your essential outgoings, such as food and energy bills
  • Any assets you own
  • Other incomes
  • Size of debts

Although divulging some of this information may make you feel uncomfortable, if you are considering a debt management plan, then you will already be under some stress. The management plan will offer a solution, whereas juggling your debts about will not.

Other Costs

As the debt management company are conducting business, they are entitled to a fee from you. This is no problem, as long as you are aware from the beginning what the charges are for, and how much they are. If you are in talks with a debt management company, remember to ask about their setup fee, their fee each time you deposit money (a handling fee) and their fee to approach each company.

In the great majority of cases, the debt management company can secure an agreement with all of a person's creditors. For more information, contact a company such as National Collections.