Debt Management Plan
Merits:
Debt management plans can be very effective in offering a short term solution to an acute or chronic cash flow problem. In some instances customers can use them as a final solution until debts have been entirely cleared. In practice however debt management plans tend to be seen as short to medium term solutions rather than a final solution.
Advantages
- A debt management plan can resolve a cash flow problem by only offering creditor what is affordable.
- Your personal administration is cut down as you only deal with one company.
- Communications with creditors should stop as they should direct all communication through the debt management company. (This may not always happen).
- Interest can be frozen which means that your payments will materially reduce the outstanding capital balance.
Disadvantages
- Creditors can turn interest and charges back on at any time.
- Creditors can still pursue you for the debt and can petition for bankruptcy if they wish.
- If interest is not properly frozen debts can in fact get bigger not smaller.
- The length of time to become debt free can be very long.
- Your credit rating is damaged the extent of which is dependent on the negotiation undertaken.
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DMPs: Main
DMPs: Criteria
DMPs: Considerations
DMPs: Costs
DMPs: Merits