Not everyone who has a debt problem needs professional help; for some, a debt management plan is a good option that can temporarily relieve the pressure and allow you to get back on your feet. If your attempt at a debt management plan was to fail, however, you may need to consider a formal debt solution and seek the advice of professional insolvency specialists.
A debt management plan is an informal approach to reduce debt and its associated burdens as quickly as possible. It involves you approaching your creditors individually and trying to come to an arrangement with them.
The steps involved with setting up a debt management plan are as follows:
This could easily be labelled the most crucial step of the process. If you skip the planning stage and negotiate unrealistic terms, the chances of your creditors accepting your proposal will be highly unlikely. That is why it is imperative to devise a well-researched budget for your debt management plan, to ensure you are able to afford to make your repayments.
The next stage is trying to convince your creditors of your debt management plan. This may involve further negotiation of your planned budget, but it is important to ensure that your negotiations do not exceed your budgeted abilities. In some cases, creditors may agree to reduce or freeze your interest for a period of time or lower your repayments, if you can provide evidence which supports your case for financial hardship.
If you reach this stage, this means your creditors have accepted your proposal. You must continue to make your agreed repayments on time, as failure to do so will see your creditors rapidly withdrawing from your arrangements.
A successful debt management plan the pressure of creditor harassment and, as it is an informal arrangement, it should not result in any marks against your credit file. However, you need to remember that such an arrangement is not legally binding on all creditors, which means that a) they do not all have to agree, and b) they can change their mind any time that they want.
If you have proposed a debt management plan to your creditors and they do not accept it, or if your accepted plan has not succeeded in easing your financial pressures, you may need to consider a formal arrangement, which could be a Debt Agreement or a Personal Insolvency Agreement. Unlike an informal negotiation, these arrangements are binding on all creditors, and give you protection from any recovery action so long as the agreement is adhered to.
Get Debt Free can assist you with a Debt Agreement or Personal Insolvency Agreement – for more information on how these agreements might benefit you give our all-hours hotline a call today on 1800 981 070.