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You have decided that you want to avoid any formal insolvency such as bankruptcy or individual voluntary arrangement.

But you want to reorganise your debts to allow a lower payment and a single payment. But you do not have debt or insolvency experience or do not have the time or desire to restructure your debts.

If you wish to avoid formal tools like bankruptcy for a variety of reasons (check your objectives pages first) it may be possible to use this technique to pay one monthly payment to a debt management company.

This technique is best described (in our view) as a stopgap option. It allows a third party (debt management company) to take over the payment of your debts with a number of creditors.

You may be expecting to have a higher salary next year, or come into some money like an ISA paying out or an inheritance. In which case Debt Management can be a very sensible solution.


How does its work?

Basically if you owe say £20,000 to 7 credit card and loan companies you will be making 7 monthly payments to them and possibly only just keeping up with them. The chosen debt management company (either Debtless fo a third party) takes a statement of affairs. Then it agrees with you what you can afford to pay each month. It then agrees with the creditors to pay them an amount every month on a fixed date.

You then set up a SINGLE standing order to the debt management company.

The debt management company charges anything from 10-25% of the monthly payment. So we would only recommend using this option if you want to control debt for a short to medium period, it is possibly not a long term solution.

However, if you know that you will have a rise in income or sell an asset or inherit money then it can be a good way to hold back creditors for a period.

Always ask for clear costs and conditions from the debt management company BEFORE ENTERING INTO ANY AGREEMENT. Or call us and we will talk you though the options.

Advantages

• One single payment and one person to deal with
  
• There is no bankruptcy stigma
  
• Avoids bankruptcy or IVA
  
• Can stay as director or partner in partnership
  
• No employment restrictions
  
• No publicity - discrete
  
• Using debt management company demonstrates to creditors you are serious

Disadvantages

• You cannot force creditors to accept the deal
  
• It may take longer than an individual voluntary arrangement (IVA)
  
• The position is not crystallised
  
• The interest may continue to be added
  
• The debt can often RISE as a result
  
• You credit rating WILL suffer
  
• Cannot get rid of fines or CSA payments
  
• If you miss future payments - the deal can be torn up - debt problems all over again

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