A debt management plan is also known as a DMP and is a peronalised solution to sort out any payment problems you may be suffering.  The plan is unique to your individual circumstances and takes into consideration your income, outgoings and current level of debt.  Only licensed credit counseling services are able to offer this financial management programme.

So What Does this Debt Management Plan Involve?

The counseling service will first of all ascertain your financial background and the circumstances surrounding why or how it is you got yourself into repayment difficulties.  However remember that a debt counseling agency is not there to judge you but to getter a better understanding of your overall financial situation.  Once this information has been collected a repayment plan can be put into place which would be affordable for you to make and acceptable for your creditors.  Do remember that a debt management plan does require a level of financial discipline and commitment from you if you are to discharge the debt in the quickest time possible.

An informal agreement is then put in place and the new revised offers of payment put forward to your creditors.  Once accepted the debt management plan will then allow you to repay your debts at through a single monthly payment you can afford and stop any creditors from hassling you as well as stopping or reducing interest and charges.

What to be Aware of When Entering into a DMP

Before entering into a DMP ensure you are fully aware of all the initial costs to set up the plan and what the management fee will be for the ongoing term of the plan.  In addition to this check any debts that cannot be included into the debt management plan as you will need to repay these debts yourself. 

Once the plan begins it is important to maintain your monthly payments and not to default on your plan else your creditors can terminate the reduced repayment plan and take further legal action so when agreeing the fixed monthly   payment ensure it is a realistic and affordable monthly payment for you to make and maintain for the duration of the plan.

A reputable debt management company will send out statements of all the payments being received and what payments are being made to your creditors so you know where you stand financially. As well as this an estimate of when you will become debt free should also be given.

Debt Plan Direct provide a national consumer debt counselling service providing full advice on all aspects of debt, budgeting and financial affiars.  Debt Plan Direct are one of the UK’s most prominent provders of debt management plans. 
 

It is a fact that in the UK during the last six months over half a million people missed their mortgage payment as a result of their existing debts squeezing their affordability.

One of the reasons for missing a mortgage payment is due to an increase in unsecured debts levels on loans, credit cards and overdrafts and having to manage the repayments on all of them. In addition to your unsecured borrowing you have your normal living expenses to contend with such as your weekly shopping, utility bills and council tax.   So if you have missed a mortgage payment there may be an underlying debt problem.

Fortunately missing a mortgage payment will not lead to any additional fines or charges as you would on a credit card debt but missing mortgage payments does indicate potential signs of financial problems.

Your rent or mortgage payment is a priority debt so should always be paid ahead of your unsecured debts such as credit card and loans to ensure no action is taken by your landlord/ lender to evict you.  Continuous rises in the base interest rate has left many homeowners to struggle with their mortgage payments along with other debts so it was a relief for many homeowners when the first rate cut was made back in December 2007 due to the increasing debt problems suffered by many in the UK.
 
The base rate cut may be a little too late for many people with struggling amounts of debt as their Christmas spending in addition to existing debts on loans, credit cards and overdrafts from the previous year begin to hit home.

If you are looking to consolidate your debts through a low interest loan you may have problems in either getting a consolidation loan or one with a low interest rate if you have missed payments on your debts this will be reflected on your credit file and many lenders will then see you as a potential risk in lending money to.
 
A debt management plan may be the best solution to manage your debts and avoid missing mortgage payments.  A debt management plan will allow you to consolidate your credit cards, loans, mail order catalogues and overdrafts into a single more manageable payment; with the interest and charges either stopped or reduced.  You then have less worry to make payments on multiple debts and instead will just have to make your rent or mortgage payment and a single affordable payment into your debt management plan.

We all now that personal debt in the UK is a major concern and there now seems to be a trend to find debt solutions to become debt free.  Individuals in the UK are now finally realizing that there are two facts for debt relief: One- it is possible to become and lead a debt free life and secondly there is nothing to be scared or ashamed of to ask for help when required.

Britains are now coming forward asking for support to fight their spending habits and eliminate their debts.

Suggestions for Instant Debt Relief

1. Start to pay of your bills as a top priority and stop any shopping habits.
   Reduce your daily spending amount and only spend money on your basic living expenses.
2. Cut all your existing credit cards and only use your debit cards or that hard earned cash.  This will stop you overspending immediately. Using credit card is one of the major reasons people get into large amounts of debt.
3. Try to do your shopping monthly instead of going every now and then when you need something- this will help reduce fuel expenses as well as saving you time.
4. Keep away from designer clothes and other luxury goods until all your debts are fully paid off and you are earning a good salary.
5. Don’t buy your lunch at work instead be healthy and save money by packing your lunch from home.  This will save you pounds in more ways than one!
6. If having a family or friends get together  ensure you prepare the budget for the party first and not the other way around.  This is a mistake that many people make when making arrangements.  Planning the party and then fixing a budget accordingly is the worst form of management!
7. Try to reduce your utility household bills by switching to a cheaper provider and the same with your telephone, mobile or broadband companies. Another simple way towards debt freedom to help repay those debts!
8. Try to find a second job to fit around your spare time along with your main job.  You can use the second salary for paying off your debts.
9. Save those pennies and the pounds will save themselves.  Forget the lottery as well as other small bets you might gamble with!

A good consolidation loan is always a good choice for some but be cautious and make sure the term, interest rates and the total amount repayable is made clear to you as in some cases you may end up paying more with a consolidation loan than compared with managing your budget and repaying debts through a debt management plan.

According to the latest figures from a survey by Money Expert the Christmas buzz is finally over as consumers fail to cope with their spending and other credit commitments with up to one in three adults worrying about their levels of personal debt. The Money Expert devised their own Debt Index which measures how well people deal with their personal debt borrowing - including mortgages, loans and credit cards - and monitors whether levels of indebtedness are rising or falling.  The figures show that 33% of adults with debts are concerned or very concerned about their ability to keep on top of their borrowing. Around 9% - or 3 million people - admitted to being very concerned about how they are going to manage their finance. Christmas spending partly explains the figure, said MoneyExpert, with 47% of adults having outstanding debts compared with 41% three months ago.  However, while 27% of those in debt have upped the amount borrowed, a similar number (26%) have cut their debts, and around 41% said they are not worried about being able to cope, despite being in debt. Sean Gardner, chief executive of MoneyExpert.com, said: “The fact that one in three people who owe money are concerned or very concerned about their ability to manage their debts is worrying. “The interest rate cuts in December and this month will help, but it remains the case that borrowers have to take action themselves.” Debt advice agencies have also rising numbers of enquiries from indebted borrowers in recent years, but said this shows more people are seeking help, not that there is a worsening debt situation. Debt levels peaked in Christmas 2005, said Chairman Malcolm Hurlston, adding that those saying otherwise often have an interest in suggesting things are worse than they really are. “People are more alert to the dangers of indebtedness, so in fact this is good news rather than bad,” he said.  Unsecured borrowing on credit cards decreased steadily during 2007, according to payments body Apacs, but rose to £56bn in December, boosted by Christmas spending.The Bank of England said total debt levels rose by £600m in December.

Carrying out a debt management plan is not as easy as it appears.  Many people think the process of combining all the debts into one lump sum payment and paying the debts off can be done by themselves.  Well, to be quite frank if it was that easy then people would not be getting themselves in debt in the first place!Before discussing debt management further it is important to distinguish between managing debts and debt consolidation. The former is a help plan to get you debt free from all of your personal debts.

 With a debt management plan you will no longer need to deal with your creditors yourself as the professionals will contact and negotiate directly with all your creditors for you as well as making the monthly payments! They will also negotiate with creditors to freeze or reduce interest charges. Once the plan begins, you only need to pay a single monthly more affordable payment.  You will find this will give you instant relief!  Your Monthly PaymentYour monthly payment into the plan will be based on your monthly income and living expenses and will be in line with your circumstances so affordable.  Once your payment is calculated the payment will be fixed.

With a consolidation loan your monthly payment will also be fixed and lower than your current outgoings but due to the rate of interest and the term of the consolidation loan you will be paying more back in the long term than your current debt level. It is therefore not wrong to state that a debt management plan can sometimes prove to be better than a debt consolidation loan.A Debt Management Plan will not only enable you to consolidate your debts into a single monthly , more affordable payment but will also allow you to escape the trap of continued debt..  So don’t be embarrassed if you are in need of debt help and contact a professional debt advice company for assistance.

Debtmatters has announced that it has quit the controversial Individual Voluntary Arrangements (IVA) sector because of the the fallout with the lenders regarding falling fees and would concentrate on providing secured personal loans instead.

Debtmatters sold its portfolio of IVAs for £6.4 million pounds to a consortium of Grant Thornton and Totemic Ltd.  This was £2.5 million pounds lower than the price the broker Numis had expected the 50 cases a month portfolio to fetch.

Debtmatters also sold other arms of the debt management business for an extra £800,000 pounds.  The company also announced it will now change its name to Loanmakers.

New banking facilities to the value of £3.5 million are in place to help the newly developed company to succeed during the turbulent credit crunch. 

In a statement the Chief Executive of Debtmatters Ges Ratcliffe stated:

“It was becoming increasingly difficult to operate a successful direct marketing IVA business with acceptable profit margins in the face of increasing costs of case acquisition and reduced fee levels in tandem with ongoing sector uncertainty.”

IVAs is a light form of bankruptcy allowing indebted consumers to pay back their debts over a longer time period (typically five years) allowing debtors to avoid the full stigma of bankruptcy.

Over the last 12 months IVA companies have been under fire from high street banks for charging the lenders a high set up fee for the IVAs and not returning enough of the money to the lender.

The IVA fees fell last year when the IVA providers and the lenders first clashed over the IVA set up fees.  Anaylsts have also told Reuters the IVA fees could end up falling by as much as two-thirds.

A recent survey by the accountants, KPMG foundthat approximately 7 million people with mortgages and unsecured debts will find it difficult to meet repayments on a regualar basis this year.

And in a separate survey by YouGov it was found that approximately 11 million people or 35 percent of UK consumers with existing debts would again find making their debt repaymens difficult throughout 2008. 

There has already been a decline in the number of people turned down for mortgages as conssuemrs find it difficult to get a mortgage.  This has primarily been due to the tightening of lending criteria by many mortgage lenders amidst the credit crunch.  KPMG fears the recent reults in the surveys will only exacerbate the mortgage decline problem further.

Steve Treharne, KPMG partner and personal insolvency practitioner, said: “Those people who have been robbing Peter to pay Paul, transferring balances from card to card, re-mortgaging and taking equity out of their property to pay off spiralling debt are fast running out of options.”

Worryingly YouGov has also discovered that  a fifth of people were resorting to debt  to pay for every day basics such as food and in some cases were using credit cards or loans to make repayments on their mortgage.

The findings comes as the Council for Mortgage Lenders (CML) revealed there were 27,000 repossessions last year, the highest number in eight years.

Mr Treharne added: “The pressure is really building on the indebted and having had their home repossessed is usually the final straw for many, they usually give up the fight and enter into a formal insolvency agreement such as bankruptcy or an Individual Voluntary Arrangement (IVA).”

Ongoing customer bad debts at problem hit credit cad firm Egg have caused losses of about £250m last year at Egg.
Egg was sold to Citigroup by Prudential last May when Egg had losses of £145m in 2006. 

Egg was started in 1998 by Prudential Insurance and floated 21 per cent of it in 2000. Prudential then bought back the minority shareholding in 2005.

Citigroup eventually bought Egg for £546m last year after Prudential held numerous talks with many possible suitors without success; at price thought by analysts to be high - in order to push into UK consumer banking.

Earlier this month Egg wrote to 161,000 customers to advise them that their cards will be stopped or their credit will be cut.  Egg’s new owner Citigroup advised these customers have shown signs of not being able to repay their loans.
The cancellation of so many cards has caused many of Egg’s customers to complain, many of whom claim to have had no problems with thier loan or credit card repayments.

 Many analysts believe the credit card provider, Egg has suffered such large losses due to the high numbers of customers defaulting on their credit cards and personal loans due to Egg’s existing book being of a lower quality when compared with many of its’ competitors.

Citigroup refused to comment on the position of Egg.

A new set of standards to help people resolve their debt difficulties through Individual Voluntary Arrangements (IVAs) have now come into play.  This comes after over one year of disputes between the IVA providers and the credit industry.

Debtors looking to enter into an IVA now have the surety that there is an agreed standard for providers to adhere to for advertising, advice, information and documentation, as well as higher levels of transparency.  This will ensure a higher level of protection in line with the FSA’s philosophy of treating customers fairly as IVA providers adhering to the standards will operate openly and fairly to help people take the right path back into solvency.

The set of protocols were agreed at a meeting between the credit industry, which was led by the British Bankers Association and IVA providers.  The meeting was also chaired by the Insolvency Service to ensure a streamlined process was established for consumers looking for help with their debts via an IVA.

BBA Chief Executive Angela Knight said: “People in debt and their creditors need to know that when an IVA is proposed it is the most appropriate solution. The BBA, the Insolvency Service and the participating IVA providers are united in support for this agreement, which should provide customers with the reassurances they need in order to make the right choice for their financial futures.”

The agreement sets out the standards that will apply to creditors and IVA providers in most IVA cases. It was agreed by representatives from the creditor, insolvency, advice and consumer sectors, under the chairmanship of the Insolvency Service.  Further work is underway to provide accessibility to better market information on IVAs through the worldwide web.

According to recent research by KPMG 22% of UK home owners are struggling to meet repayments on their mortgage and other unsecured debts; that is approximately 7 million people struggling with UK debts.  It also shows that people struggling with existing debt use credit cards or loans to pay for basic living expenses such as food, household bills and even their mortgage payments.

The coming year will not get any easier as a further poll done by YouGov shows 35% of people with debts (approximately 11 million people) admit to difficulties in meeting debt repayments.

Steve Treharne a KPMG Partner and Personal Insolvency Practitioner comments:

“Those people who have been robbing Peter to pay Paul, transferring balances from card to card, re-mortgaging and taking equity out of their property to pay off spiralling debt are fast running out of options. The credit crunch is already seeing credit card companies reducing limits and increasing their rejection rates for new customers.”

“People who previously had access to competitive mortgage deals, despite being late with a couple of payments, are going to find it very difficult to find a deal”, said Treharne. “Combine all of this with increasing energy, council tax bills and petrol prices and you can see why we are predicting a record 130,000 personal insolvencies this year. The pressure is really building on the over indebted and having had their home repossessed is usually the final straw for many, they usually give up the fight and enter into a formal insolvency agreement such as bankruptcy or an Individual Voluntary Arrangement.”

During the research people were questioned about the ‘Stigma of Debt’ and how attitudes have changed over the course of the last 10 years.  Half of the people questioned agreed that it had decreased in the last 10 years, 42 per cent thought it had decreased in the last 5 years and nearly a quarter thought it had decreased in the last 12 months.

The research further asked individuals regarding how open they are in discussing debts with their friends and family.  It was found that 48 per cent of 18-24 year (on average have debts £10,000-£19,999) were happy to discuss their level of debt with friends. However those aged over 55 years old (have on average debts £2,500-£4,999) are the least open generation to discuss debt matters amongst friends and family, with only 18 percent admitting their level of debt to friends.