A Guide to Debt Management - Part 4

Your guide to debt management - Part 4

Following on from our previous guide, this - our fourth debt management guide will be looking at what happens when your on a debt management plan and the process's a company has to go through in order to manage your account on an ongoing bases and what you can do to help your DM plan run smoothly

So you've reduced your debt management payment are happily enjoying the benefits of being able to repay your debts at a level you can afford - but what goes on behind the scenes?

How a debt management company sets up your account...

A debt management company will set up you new monthly DM payment based on your disposable income as explained previously, this one single payment allows for the setting up and continuous management and payment of all your debts on a DM program.

Your account should be set up so that when you make your monthly payment, it will go into a client account which the company can not use for its own purposes - from this client account your creditors will be paid what was agreed within your debt management proposal and, once your creditors have been paid the debt management company will take their management fee - the client account ensures your payments are 'ring fenced' and makes it easier to manage and safer for yourself.

Ongoing management of your debts - on initial set up of the plan your DM company will be in regular contact with your creditors & yourself and will be making regular phone calls too and throw and sending proposals out to make sure the plan is set up as agreed, it is common for regular reviews to be taken - usually every 6 to 12 months where the company will check your affordability to make sure they are sustainable, they will also make regular reviews of your creditor status and check interest and charges have ceased, if they have not stopped your DM company will request all interest and charges are stopped, however its up to your creditors to do this and its unlikely they will until they see some form of commitment to the program, usually by way of regular payments being made.

If your financial circumstances change
- if and when your financial circumstances change you should ideally let your debt management company know so they can review your plan and make any necessary alteration to your payment - this may mean increasing or decreasing the amount each month which in turn will either shorten or lengthen the time its going to take to repay your debts.

Don't make the mistake of changing your payments if the alteration is a one off and not to e repeated or if your income varies regular due to commission or overtime then you wouldn't want your debt management payment to alter each month, that would defeat one of the main advantages of the DM plan which is a regular, consistent and affordable payment. Your DM company will only want to know if its a change that's going to stay and if its going to affect your financial circumstances.

Bearing in mind, when people apply for a DM plan all their expenses are taken into account, as long as the budget worked out is adhered to there should never be a missed payment to the plan unless something unforeseen crops up in which case its recommended you speak to your DM company to help resolve it - remember they are on your side and will always work with your best interest at heart!

For more information read our or previous DM guide