Debt Management and the Budget

(No Ratings Yet)

 Loading ...

A Debt Management Plan is an informal arrangement which is made between a debtor and the people and organisations to which he or she owes money. Generally creditors will agree to reduce or freeze interest charges during the course of the plan. Plans can be assembled and administered by an individual or by a professional debt management organisation. Help is available through a number of charitable organisations such as the CAB and through a number of debt management companies, such as Gregory Pennington.

An alternative solution to debt is an Individual Voluntary Arrangement (IVA). Again this is an arrangement between debtors and creditors but this time it is formal and takes the form of a legal contract. It is a form of insolvency in which a part of the amount owed is written off after five years during which time it is necessary for the debtor to make repayments towards his or her debts.

Given the stringent cutbacks announced in the current budget it is likely that many more people will be forced to seek help with debt in the coming months and financial professionals are predicting that debt solutions such as debt management plans and IVAs will become more common.

Currently eighteen percent of people in Great Britain are increasing their levels of debt merely to pay for day to day living costs and a large number of these are finding it increasingly difficult to keep up with repayments, which is forcing them into ever upward spiralling debt. Although short term debt might seem to be an easy way to pay for the cost of living, there is a big danger that this can lead to unmanageable levels of debt.

It is apparent that changes in circumstances which are outside of the control of individuals are the reason why many are being forced into seeking help with managing their debt.  As the government increases its efforts to reduce national debt many individuals and small companies are likely to experience financial difficulties.