Debts between £5,000 & £15,000

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People with debts between £5k & £15k should consider a Debt Management Programme which differs from an IVA which is a much more formal, legal process administered by a licensed Insolvency Practitioner.

Typically, a Debt Management Programme will consolidate all of your unsecured debts into one lump sum, paid on a pro-rata basis in a single, more affordable monthly payment. The debt practicioner will thoroughly review your financial position and help you arrive at a realistic, manageable payment plan that takes into consideration reasonable living expenses. They will then negotiate this figure with your creditors with the aim of reducing the debt to enable you to completely clear the debt over a period of time. This will also ensure that payments to priority debts (mortgages etc.) can be comfortably met and you can look forward to a debt free future.

In doing this, the debt management company will set out the offer being made to creditors, which will include the monthly amount that the debtor is able to pay all their creditors and over what period of time. It will explain to creditors your current circumstances and highlight the advantages to them in accepting the offer being made, as opposed to you going bankrupt where they would get nothing.

The debt management company will ask all creditors to freeze any interest accruing on the outstanding debts and to cease any further charges. It will also ask that they refrain from taking any legal or other action to recover the debt providing the debtor keeps to the terms set out in the plan.

This proposal is sent to all creditors for consideration. Whilst creditors are not obliged to agree to the plan, they are more likely to accept it once they are made properly aware of the debtors true position, outlined by a debt management professional. Once agreed, the DMP is usually administered by the company that drafted it.

Once the Debt Management Programme has been approved by your creditors, it is your responsibility to continue paying the agreed payments to their administrator in a timely fashion. The administrator will then ensure that these payments are distributed promptly to all creditors on a pro-rata basis until its successful completion. It is in the debtors own interest to maintain these payments as failure to pay could result in creditors cancelling their agreement and demanding instant repayment of their debts in full. This situation should be avoided at all costs. If you experience difficulty in making the agreed payments or your situation changes, you should immediately contact the administrator who should be able to re-negotiate the terms with creditors.