Is debt management an alternative to bankruptcy?

There's more than one way to tackle debt problems. After all, two people's debt problems won't be exactly the same - depending on the situation they're in, there can be a massive difference in terms of:

•  How much they owe in total

•  What they can afford to pay every month

•  What they're supposed to pay every month

•  How long it'd take to repay their debts in full

•  How much their property is worth.

So there's a range of different debt solutions available. If you're struggling with your debts and thinking about getting professional help, it pays to find out about your options, so you can see which debt solution could be right for you.

Here's a look at the different debt solutions that Gregory Pennington can provide

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Is debt management an alternative to bankruptcy?

It is - and it isn't (as it depends on what you mean by 'alternative').

Debt management won't be a suitable alternative to bankruptcy for someone who's already in a situation where they can't afford to repay their debts in full and/or can't commit to regular payments every month. Someone in this kind of situation might need to consider bankruptcy - or possibly a Debt Relief Order (DRO), if they met the criteria for it.

However, debt management could be an alternative for someone who's tackling their problems in time, before their debt problems get so bad that they have no realistic chance of repaying the money they owe.

That's because a debt management plan is designed to help people repay their unsecured debts in full, making smaller monthly payments than they originally agreed to.

•  If they can't make a 'reasonable' payment every month and can't repay what they owe in a 'reasonable' period of time, a debt management plan simply won't be suitable.

•  If they can do that, debt management could help them get back on top of their payments and start paying off their debts at a realistic rate, so things don't get entirely out of hand.

Click here for more on debt management plans

Click here for more on bankruptcy

What about the consequences?

Every debt solution has its 'downsides', but they can be very different.

Someone thinking about starting a debt management plan would need to be aware that:

•  It's only an option if they can't afford their original payments

•  Their unsecured lenders don't have to agree to a debt management plan

•  They could pay more in interest in the long run if their lenders don't agree to freeze interest

•  Making smaller payments can damage their credit rating for up to six years.

Someone thinking about entering bankruptcy would need to be aware that:

•  Their assets (including their home) could be sold so they can repay their lenders more of what they owe them

•  Their bankruptcy will appear in newspapers

•  Entering bankruptcy can stop them working in certain professions.

•  Entering bankruptcy will seriously affect their credit rating for six years.

If you have any further questions about debt management, bankruptcy or debt in general, fill in our solution finder and one of our experts will call you back - or you could call us on 0800 161 3516 (calls from a mobile might be cheaper on 0161 605 4824).

Matthew Plant

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