How safe is my debt management plan?

If your debts have become unmanageable, there are several debt solutions that could help. One is a debt management plan - a new repayment arrangement with your lenders that can enable you to repay your debts at a pace you can manage.

What is a debt management plan?

A debt management plan is an informal agreement with your lenders in which you`ll make lower monthly payments towards your debts, based on how much you can realistically afford, over a longer period of time.

Some debt management plans also involve a freeze or reduction in interest and other charges - depending on what your lenders agree - which can prevent your debt from growing. Note that repaying your debt more slowly can mean you`ll pay more overall in interest if they don`t agree to freeze your interest.

It is possible to arrange a debt management plan on your own (by contacting your lenders and negotiating new repayment terms) or through a debt management company. A debt management company can negotiate with your lenders on your behalf and may act as a point of contact between you and your lenders for the duration of the debt management plan.

Is my debt management plan safe?

A debt management plan is an informal arrangement, and your lenders are not obliged to accept any changes to the repayment terms you signed up to when you took on your debts in the first place. If they do, they`ll normally agree to accept them for a specified period of time (e.g. 12 months).

When this time is finished, they may wish to review your circumstances - but if they`re happy with the way your debt management plan has been working so far, they`ll probably feel there`s no reason to resort to an alternative, such as trying to make you bankrupt.

After all, it`s in their interest as well as yours for the debt to be repaid as quickly as you can realistically afford, even if that means lower monthly payments.

It`s not just about an agreement with your lenders, though. Before you enter into a debt management plan, you must be sure that you can commit to regular monthly repayments. If you can`t, you may want to consider another debt solution, such as bankruptcy or a Debt Relief Order, depending on your circumstances.

To find out more about debt management, call our expert debt advisers on 0800 161 3516.

Note that lenders will only accept lower payments if you really can`t afford the original payments - and that failing to stick to your original repayment agreement can end up damaging your credit rating (whether or not you enter a debt management plan) and this can make it harder and/or more expensive to obtain further credit for the six years it remains on your credit report.