Debt Management Plans - Advantages

With more people seeking help repaying unsecured debt, the number of options available can be confusing. Debt Management Plans (DMPs) are designed to give people flexibility in their repayments. There are a number of advantages a DMP has over some of the alternatives such as Bankruptcy.

Flexibility

By ascertaining monthly income and outgoings, a DMP proposal will allow an individual to repay a monthly amount to their creditors that is affordable and will still allow essentials such as rent, mortgage, utilities bills and food expenditure. Should circumstances change during the duration of the DMP, then it is possible to increase the repayments to clear the debt at a faster rate. While it is usual for all eligible debt to be included within the DMP, it may be possible to exclude some creditors, allowing for them to be repaid separately.

Home security

Unlike Bankruptcy, whereby it is likely homeowners will be required to give up their homes, the cost of a mortgage or rent is included in the initial calculations for the DMP, thereby offering the security of not needing to sell the family home, or need to move into cheaper accommodation. Furthermore, there is no requirement to release equity in a property as there may be with an Individual Voluntary Agreement.

Debt Free

As a DMP is designed to repay all the included creditors an amount monthly, there is no need to borrow further to repay debt. By the end of the DMP, the individual will be debt free and will have a fresh start.

No Stigma

As a DMP is not listed on the Insolvency Register, and there is no need to inform employers and the like, there is no worry about the social stigma that can be associated with other solutions. It is a private arrangement between the debtor and the creditors. Provided creditors are in agreement, it can also help to reduce the calls from creditors demanding repayment.

As with any debt problems, it is important to seek independent advice to assist in selecting the best option for the individual. While there may be a number of benefits to a DMP, it is important to remember there may be drawbacks, and therefore another option may be more beneficial.

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