Debt Management Adviser’s Don’t bite!
People in debt are often anxious, apprehensive and frightened of the unknown when they first contact a debt Management organisation. This fear is mainly due to the fact that they don’t know what to expect at their first meeting. The best place to start is by contacting a Debt Management charity as they provide a free service to anyone in debt. You will often be put through to one of their professionally trained debt management adviser. The debt management adviser will normally start by taking down your personal details and information about your circumstances before assessing your current financial situation. You debt adviser will need to calculate your monthly income and outgoing, like mortgage, loans, store cards and credit card details. Once they have accessed your current situation they will then be able to advise you of the best way forward.
Debt Management Solution
Debt Management advisers will generally recommend one of the following four types of debt management solutions, in order to provide you with a debt solution:-
Restructure your debt
Restructuring your debts means renegotiate your loan or mortgage agreement with your provider. If your finance provider agrees to you increasing the term of your loan or mortgage agreement then you will have a reduced monthly payment. This process requires you contacting your loan providers and asking if you can increase the term of your loan or mortgage. Be aware that you will pay more in interest payments if you extend the term of your finance agreements. If you are considering extending your mortgage then it will depend on your age at the time and whether your mortgage will be fully paid before you retire. In some exceptional circumstances a mortgage provider may allow the borrower to switch their mortgage to interest only from a repayment mortgage for a short term to help provide payment relief. Serious consideration needs to be given as this solution will leave your home without a repayment vehicle to pay off your mortgage when you retire. Before considering any of these solutions you should always take professional mortgage advice. Restructuring of debts is normally done by the individual and not your debt management adviser.
Debt Management Plan
Your debt management adviser will send every company that you owe money to a statement of your monthly income and outgoings. They will provide each of your creditors with a list detailing how they have broken down your payments and how much you can afford to pay each of your creditors monthly. You then repay your creditors back monthly and if your finances improve you will pay them more, in order to clear the outstanding debt you owe them. Your debt management adviser will ask each of your creditors to stop charging you any further interest on the money you owe them. It is dependent on each individual credit as to whether or not they agree to this. Your debt management adviser will normally negotiate all your monthly payments with your creditors and they will normally manage your case ongoing.
Individual Voluntary Arrangement (IVA)
A debt management adviser will normally recommend an IVA practitioner who can handle your case. This is a legal agreement that is drawn up with all the companies that you owe money to. Your monthly payments are then agreed through the courts and you pay your IVA practitioner who then pays your creditors as agreed. An IVA is managed by an IVA practitioner who oversees the whole process. The repayments are based on your affordability and your creditors agreeing to a reduced payment over the next three to five years.
Circumstances might be so bad that your debt adviser may recommend you petitioning for Bankruptcy or you could wait until one of your creditor’s makes you bankrupt if you don’t have the £700 needed to declare Bankruptcy. This solution is normally recommended when your debts are so massive and you have no ability to pay them off. Bankruptcy can last for 12 months to 5 years.
The Fifth Solution
The fifth option is to ignore your debt problems and carry on as if there is nothing wrong. This is not advisable as this is probably part of the reason why you are in this mess in the first place.
Debt Management Warnings
Here are two debt warnings that you need to be aware of:
- What ever you do don’t be tempted to abandon your property. Your mortgage lender can still add interest and charges to your debt until your home is sold. They can pursue you for the money for up to 12 years for their money. Try and sell you home first or seek a solution. Best solution here is pay the mortgage first each month this keeps a roof over your head and then divide what is left between the other creditors you owe money to after you have paid your utility bills and food bills. Make sure you pay them something each month.
- Beware of Rent-buy-back schemes. This is another option which has appeared recently – Its being touted as the mortgage rescue plan or rent-back schemes and is not regulates at all. Be careful of these schemes as they will buy your home from you to get you out of a problem with your mortgage lender now at a knock down price for an immediate sale. They then offer to rent your home back to you so that you can continue living there. Slowly over a period of time they start to increase your rent in order to get you to move out. Take advice first!
In answer to the question of do ‘Debt Management Advisers bite?’ No they don’t bite but they can help and assist you. However beware of any debt management companies that offer to take on your case for an upfront fee and a monthly fee thereafter in order to help administer your debt management plan. Debt management companies that charge you fees will bite you as you will end up paying less money monthly to your creditors. It will take you longer to repay your debts to your creditors and there is a possibility that you will end up getting further into debt to get out of debt this way.
My advice to you is contact a professional debt management adviser from a Recognised Debt Management companies. They will talk through your personal circumstances first and you should take their advice. What ever you do don’t bury your head in the sand and hope the problem will go away or that you will win the National Lottery, the chances of that happening are 17,000 to 1. If you are in need of any debt management or bankruptcy advice, then a great place to start would be a visit to the Debt Free Direct website, where you will find all the help that you require.
Your thoughts and comments about your experiences of using a debt management adviser are welcome below.