Debt Management Plans
Personal debt management plans are NOT legally binding debt solutions!
1: A debt management plan is an informal agreement between a debtor (possibly you) and a creditor (i.e. Credit Card Company X) to repay an outstanding amount over a period of time that is affordable to the debtor.
2: An individual can set up their own debt management plan, this is known as (self debt management or dealing directly with creditors). You can select the services a fee charging debt management company such as Lewis Alexander, or a free to client debt management service such as National Debtline or visit / contact your local Citizens Advice Bureau.
3: Whilst contributing to a DMP or debt management plan, the debtor would usually make one, affordable weekly or monthly payment into the debt management plan and the operator of the plan would distribute the debtors funds to the respective creditors on what is called a pro rata basis.
4: The amount each creditor receives is based upon the debtors disposable income. The disposable income is worked out by deducting the debtors monthly expenditure from the debtors monthly income. If the debtor has a positive disposable income (meaning more than zero to spare each month) then the creditor with the largest percentage of the debtors total debt receives the largest share of the debtors monthly disposable income.
5: You can work out how long it will take to clear outstanding credit utilising a debt management plan by dividing the total debt by the total monthly disposable income.
6: It is not advised to undertake a debt management plan for longer than 120 months or ten years.