What are the advantages of a Debt Management Plan?
Compared to an IVA, a Debt Management Plan is relatively easy to put in place. Basically you work out what you can afford to pay each month to all of your creditors and then divide this equally between them on a pro rata basis. These reduced amounts are then offered to the creditors. Once accepted as reasonable, this situation gives immediate relief from your creditors as suddenly you are making regular monthly payments to them based on what you can afford – no more robbing Peter to pay Paul. If you are a home owner, a Debt Management Plan will normally not force you to consider releasing any equity from your house. In addition, the agreement is informal. As such, it is not a legal requirement to include all of your creditors. As such, you could undertake a Debt Management Plan with most of your creditors but leave perhaps a credit card out and continue using that as normal (although this practise is not recommended). There are of course some downsides to the Debt Management Plan which
