How does a debt management program help me?

Answer 1

If you think you are going to get into debt or you find you are in debt, it is important to act as quickly as possible - the longer you ignore the problem the more charges get added on to your debt - it grows!.

A debt management program is a program (usually free) where a person or agency will help you manage and hopefully repay your debt.

The debt management program should have the following objectives:-

# To itemize (make a list of) all your income and assets

# To itemize (make a list of) all your outstanding debts # To itemize the cash you need each week to live on (depending on your family/home circumstances). On the basis of this information the program will:-

# Ensure that you are getting all the income/benefits you are entitled to. # Sort out the debts in order of priority for payment (some debts have to be payed while others can be negotiated) # Ensure you use what you have in the way of assets to clear the priority debts. # Help you close any accounts that need to be closed and hopefully open a simple bank account that does not allow you to go into debt again.

Once this is done the adviser will write to each of the remaining debtors offering an amount that you can afford to pay them (the evidence for this - the information put together above) will need to accompany this letter.

At this point the outstanding debt owners (which may now be the bailiffs) may agree to the payment offered at which point the accrual of charges on the debt will cease. If not then the problem will be taken to court and you will be made bankrupt. However bankruptcy is not the preferred course because it closes the account and means that they cannot recover money in future (say if you win the lotto or inherit money) - they will usually keep the account open and accept a small payment from you each week/month until the debt is cleared.

Once agreement is reached it is up to you to then meet the payments you have agreed to and eventually your debt will be cleared.

You may think bankruptcy is a better option but it seldom is as going bankrupt cost you even more money and will ruin your credit rating for evermore. An agreed debt payment program is normally a much better option. Note however that if you are going into debt you should cut up your credit cards so that you can't use them and do not be tempted to borrow more money to move the debt around - without a plan the debt will just come back worse a short time into the future.