Debt Management Plans

Bright Oak can set up a Debt Management Plan (DMP) for you. Contact us to find out whether you qualify.

Introduction

Debt Management Plans enable those struggling with unmanageable debts to reduce their monthly repayments.

A debt management plan does not have the stigma of bankruptcy, does not involve taking out another loan, and can provide peace of mind.

Key benefits are that the debt management company will handle all contact with your creditors, you make one simple repayment each month to cover all unsecured debts, and in many instances will see interest and other charges frozen.

Who Can Enter into a Debt Management Plan?

Typically you would owe over £5000 in unsecured debts. Unsecured debts include debts like credit cards, personal loans (if not secured on your home), overdrafts, store cards, catalogue bills etc.

Your personal financial circumstances would be recorded. If after paying for all of your essential expenditure each month (mortgage/rent, utility bills, food, travel etc) it is clear that you do not have enough money left over to be able to pay your debts then a debt management plan could be a good option for you.

How Does a Debt Management Plan Work?

A debt management plan is an informal debt management arrangement between your creditors and yourself. You agree to pay what you can reasonably afford towards the debts you owe. This agreement is usually kept in place until the debts are paid off in full. In return your creditors may agree to freeze interest and other charges provided you stick to the agreement.

The arrangement process is handled by a debt management company. They work with you to put together your proposal to your creditors. After they send the DMP proposal to your creditors, they will deal with the responses received. Your creditors may accept your proposal, reject it, or propose changes. The debt management company will discuss any proposed changes with you so that you may decide whether to accept them or not. An example of a potential modification might be if a creditor believes you have allowed too much or too little to cover your household expenses.

Once agreement has been reached with your creditors you will make a single monthly payment to the debt management company. They will distribute that DMP payment to your creditors on your behalf, and deal with any correspondence or calls.

Fees and Costs

Bright Oak Debt Management, like other debt management companies, retains the first month’s payment to cover the costs of negotiating the agreement with your creditors.

Thereafter a management fee of 15% of future payments would be charged to cover the costs of receiving your payment, paying your creditors, and any contact with you and your creditors.

Summary of Debt Management Advantages

• Creditor pressure is removed.
• No need to deal with collections letters and calls.
• A reduced monthly payment giving you financial breathing space.
• Your regular living expenses are taken into account, ensuring your personal and family needs are covered.
• Homeowners remain in their home provided any mortgage payments are kept up.
• Avoids the stigma of bankruptcy.
• Generally no need to inform an employer.
• Interest and charges may be stopped or reduced.

Some Potential Disadvantages

• Debt management reduced monthly payments will extend the period taken to repay your debts.
• Charges by the debt management company may extend the period taken to repay your debts.
• As an informal agreement it’s possible your debt management creditors could later change their mind about an agreement.
• Some creditors may wish to make a note on your credit history that you have entered into a debt management plan.

Bright Oak can set up a Debt Management Plan for you. Contact us to find out whether you qualify.