Debt Management Plans explained and help available

A Debt Management Plan (or Programme) is one of the several methods by which you can protect the occupancy of your home, by the prioritisation of your debts. The following glossary article: “What is a Debt Management Plan? How Shire can help you.” examines how Shire Direct can assist you in arranging your financial affairs with a Debt Management Programme.

Table of Contents:

By providing an extensive range of solutions, our aim is to help our customers to regain control of their finances. Our principal objective in these situations is to focus on the priority debts, such as mortgage (or rent) repayments.

Once your priority debts are taken care of, the remainder of your debt is then re-arranged by careful negotiation with your creditors, and arriving at a solution that is affordable.

What is a Debt Management Programme?

If you are experiencing pressure from your creditors and finding it hard to cope, borrowing more money is unlikely to be the ideal solution. With a Debt Management Programme, your monthly payments could be reduced by up to 70%, usually leaving you with one single lower monthly repayment. Highly skilled advisors will negotiate with your creditors in order to reduce your monthly outlay.

The object of the Debt Management Programme is to leave you in a position where your monthly payments are affordable, especially taking into account your ability to be able to maintain your mortgage (or rental) obligations.

How does a Debt Management Plan work?

Carefully structured Debt Management is designed to enable you to pay one simple lower monthly payment, thereby taking away the stress and worry of day-to-day dealings with your individual creditors. Once your creditors can see a regular pattern of monthly payments being made to them, they will usually be happy to negotiate the freezing of charges and interest on the accounts.

Case Studies

Case Study 1
Miss D was struggling to maintain her financial commitments.
Her rent payment was £260 per month, her monthly household bills were £440 per month and the contractual payments for her £8,000 of unsecured credit totalled £195 per month. This represented total monthly commitments of £895.

Her net monthly income was only £750 so it was therefore determined that the amount available to fund her credit commitments was £50 per month.

A Debt Management Programme was proposed with a monthly payment of £50 resulting in a total saving of £145 per month. This immediately relieved the pressure and enabled Miss D to maintain her rent payments.

Case Study 2
Mr L was struggling to maintain his financial commitments. His rent payment was £187.50 per month, his monthly household bills were £489.50 per month and the contractual payments for his £4,268 of unsecured credit totalled £265 per month. This represented total monthly commitments of £942.

His net monthly income was only £780 so it was therefore determined that the amount available to fund his credit commitments was £103 per month.

Therefore, a Debt Management Programme was proposed with a monthly payment of £103 resulting in a total saving of £162 per month. This immediately relieved the pressure and enabled Mr L to maintain his rent payments.

It is often possible to combine products like the Debt Management Programme with other products in order to provide the best solution. For example an Individual Voluntary Arrangement (IVA) can often be used in conjunction with a Debt Management Programme to provide financial relief at the earliest possible opportunity. This is demonstrated in Case Study 3 below:

Case Study 3
Mr & Mrs H were struggling to maintain their financial commitments. Their rent payment was £525 per month, their monthly household bills were £1,141 per month and the contractual payments for their £45,548 of unsecured credit totalled £1,011 per month. This represented total monthly commitments of £2,677.

They only had a joint net monthly income of £2,133 so it was therefore determined that the amount available to fund their credit commitments was £467 per month.

Proposed Solutions:
a) Debt Management Programme
Because an IVA can usually take between 3-6 months to set up, a Debt Management Programme was initially proposed with a monthly payment of £467. This resulted in a total saving of £544 per month, and immediately relieved Mr & Mrs H’s financial pressure and enabled them to maintain their rent payments.

b) IVA
Following on from the Debt Management Programme, an IVA was then proposed, again with a monthly payment of £467 and a saving of £544 per month. During the 5 year term of the IVA Mr & Mrs H will have paid back £28,020, representing a 39.5% reduction in their total unsecured debt. Their creditors will then write off the remaining £17,528.

Is a Debt Management Programme suitable for me?

If you cannot meet your current contractual credit repayments, and you are paying out more than you have income coming in, then a Debt Management Programme is highly likely to be an effective way of managing your debt, keeping your head above water, and keeping you in your home. However, after your priority debts (mortgage or rent payments), you must be able to afford to pay your unsecured creditors at least £50 per month.

Importantly, you should bear in mind that a Debt Management Programme is not intended to be a long-term solution. It is an effective method for you to pay your debts each month at a level you can afford, until your situation improves or a more appropriate alternative long-term solution can be found.

What are the Advantages and Disadvantages of a Debt Management Plan?

Advantages

You have the benefit of one lower regular monthly payment
All communication with your creditors is handled by an experienced advisor
You can usually review your account online
It is often possible to have interest payments frozen on unsecured debts

Disadvantages

Debt management can have an adverse effect on your credit record
It will take you longer to pay off the full amount of your credit balances because your monthly payments have been reduced.

How can Shire Direct help me arrange a Debt Management Programme?

At Shire Direct we pride ourselves in being able to provide our customers with the individual attention that many of our contemporaries lack, and we always strive to make the process as fuss-free and painless as possible.

Naturally, we will undertake to perform an analysis of your financial situation to work out what priority debts you may have. (Priority debts are classed as Mortgage/rent payments, gas/electricity/ water/council tax, plus any arrears that might have built up). This analysis will also include the basic costs of living such as food and your general household living costs.

It is only after these figures have been taken into account that we can see what remains, and it is this sum, which will determine the proposed payment to your unsecured creditors. By doing so, we should be in a position to provide you with a budget that is both manageable and affordable, and is designed to put you back in control of your financial situation, and in many cases – will help you to keep your home. It really is important when tackling the management of your debts, that the full extent of the options available to you are carefully examined and discussed.

We underline the importance of being aware that many cases will involve a combination of solutions. This will ensure that you receive the best possible advice according to your individual circumstances.

Our aim is to leave our customers with the simple task of signing the documents, in the sure knowledge we have carefully weighed up your situation, discussed the various options open to you, and completed the paperwork on your behalf.

So, if you have been struggling with trying to make your income stretch, but you can no longer meet your outgoings, the chances are you’ll be approaching the end of your tether, and you may well be feeling that there is nowhere else to turn.

Here at Shire Direct we’ve been providing our customers with a range of financial services products for more than 20 years and have recently introduced a new range of Credit Management Solutions. So it’s highly likely that we can come up with an appropriate solution for you. Thus if you are experiencing problems with debt, and have difficulties in making ends meet, we would strongly urge you to give one of our Advisors a call.

If you would like to discuss how a Debt Management Programme could help you, please do not hesitate to contact us in confidence. You’ll find our approach to be friendly yet professional and not in the slightest bit stuffy.

Just ring our Help-line on 08000 282 281. We are open until 10.00pm daily, including weekends, and the call is free and without any obligation.

Make that first step of regaining control of your finances – call us today!

Enquire Online now, or call us today 08000 282 281 - our freephone lines are open 8am-10pm everyday! We'd love to hear from you!

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