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Formal Alternative To A Debt Management Plan |
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As a term, “debt management plan” can be used in a few different ways. For an individual, a debt management plan may simply mean carefully budgeting in order that they can keep up with their repayments and clear their debts as soon as possible. The term also refers to debt solutions in general, with various types of debt management plan including options like an IVA or bankruptcy for example. Most frequently the term refers to an informal but structured attempt to create agreements with unsecured creditors to repay debts at a (lower) affordable rate. For the purposes of this article we are going to look at how a debt management plan (DMP) operates without making reference to formal insolvency options (where some or all unaffordable debts are written off). Where debts are no longer affordable, but an amount can be paid from spare income each month, debt management plans are recommended for tens of thousands of people each year. In particular they are used by people with debt concerns that are problematic rather than severe, or where the debtor emphatically wishes to repay the full amount owed rather than some debts being written off in formal insolvency. Debt management plans are very popular in Scotland, as they are throughout the UK. Wherever you live in the UK however a DMP does have some flaws. Creditors very often agree to freeze interest when a debt management plan starts, but they don’t have to and where this fails to happen interest costs can mount up quickly. A debt management plan also does not prevent creditors aggressively taking legal action if they see fit to take this path. The good news for Scottish residents is that they have an alternative which overcomes these debt management plan flaws. It’s called the Debt Arrangement Scheme. Once a Debt Arrangement Scheme has been set-up, interest stops and legal action will not happen on these debts assuming that you stick to the terms agreed. The bad news for Scottish residents is that they very often aren’t told about the Debt Arrangement Scheme. Access to a DMP is promoted throughout the UK on a massive scale. All types of promotional methods are used including email campaigns, websites, texting campaigns, cold-calling, and mainstream advertising by debt management plan companies and charities. Sadly these marketing promotions don’t often enough discriminate between those that live in Scotland and those that do not. A debt management plan may well be right for you if you live in Sheffield or Worcester, but the Debt Arrangement Scheme is more likely to be right for you if you live in Motherwell or Perth. These promotional methods often focus on the main UK market of England/Wales/Northern Ireland and the messages are geared up to best advice there. The end result is that many people in Scotland are presented with all of the benefits of a debt management plan without ever being aware that the Debt Arrangement Scheme would offer the same benefits plus a whole lot more security and certainty. A debt management plan may be right for residents of Scotland that need high levels of flexibility and who perhaps anticipate a significant change in circumstances quite soon (at which point another plan will be put in place). For almost everyone else though the Debt Arrangement Scheme, a formal DMP, represents a much better option. It’s a great shame that not everyone is told about its’ existence so that more informed decisions could be made. |
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