Debt management - is it Government-backed?

There are a number of debt solutions that may be available to people struggling with their debts, and some are more formal than others. For example, there`s the formal, legally-binding IVA (Individual Voluntary Arrangement) - but a debt management plan (a less formal debt solution) might be more suitable for some people.

Is a debt management plan Government-backed, like an IVA?

An IVA is governed by the Insolvency Act 1986. Borrowers are fully protected from further action from lenders while the IVA is in progress.

A debt management plan is not legally binding in any way, but that doesn`t make it a less suitable debt solution for some people. The most appropriate debt solution for you will depend on your personal circumstances.

A debt management plan, for example, may be more appropriate for someone who thinks their financial situation may change in the foreseeable future, or who is concerned about their credit rating - debt management will have an effect on their credit rating, but an IVA will have a more significant impact.

How does debt management work?

On a debt management plan, you`ll agree to make lower monthly payments towards your debts, based on what you can afford after your essential commitments have been covered.

This will usually mean you`ll be repaying your debts for longer. This can also mean you`ll pay interest for longer - and you may pay more overall as a result.

However, in some cases it may be possible to negotiate a reduction or a freeze in interest and other charges, which will prevent your debt from getting any bigger. Bear in mind that lenders aren`t obliged to agree to any changes to the way you`re repaying your debts.

It`s possible to arrange a debt management plan by yourself, but this can be time-consuming and involves a lot of negotiation with lenders. This is one reason many people prefer to use a professional debt management company, which can carry out negotiations on their behalf.

Is debt management right for me?

In general, a debt management plan is suitable for people who cannot afford to repay their debts under their existing agreement, but who could afford to repay those debts in full in smaller amounts.

However, there are a number of factors that can affect this, and you should always speak with a professional debt adviser before making a decision. With their experience and expertise, they should be able to help you identify the best debt solution for your needs.

Related resources:

• Debt Management
• Debt Management FAQs
• Help with debt management
• Is debt management a good idea?
• Comparing IVAs with debt management plans
• Which debts can I include in a debt management plan?
• Can debt management stop my debt interest?
• IVA
• IVA FAQs
• IVA: advantages and disadvantages
• What types of debt can an IVA include?
• IVA requirements
• Can an IVA save me from bankruptcy?

Tags: debt, debt management, government, government debt management, government backed, government scheme

Our initial advice on your best financial solution is free. Fees payable when continuing service is provided. Calls may be recorded for training and quality purposes.