Debt management plans are informal agreements made with your creditors, this is done by a debt management program company. The idea of a debt management plan is to reduce your monthly out goings and only pay one payment out a month. Debt management plans are usually set up by a debt management company. It is important to understand this is not a consolidation loan, it is an agreement arranged by a third party with your creditors. A debt management company will take a set fee each month for arranging the payments to your creditors
How Do I Make A Debt Management Plan?
There are specialized debt management companies, they will ask for all your financial details. They will need to know you income and all your creditors who you owe money to. They will work out a debt management plan, taking into account living expenses. From this information they work out your disposable income. Once they have the information they will speak to all your creditors and try to set up payment arrangements. Your creditors are not obliged to agree to a payment arrangement but most will do. The debt management company will then take one monthly payment and split this between the creditors.
Advantages of a Debt Management Plan
• A Debt management plan is a non legal agreement, this means you do not have to offer any equity. Once you enter a debt management plan you are free to leave the arrangement any time you want without being penalized.
• They can ask to stop or reduce the amount of interest on debts. Not all creditors will do, but most debt management companies have built good relationships with creditors and will come to agreements.
• You only have to make one single payment a month
• Debt management plan aims to take away the stress by dealing with the creditors for you.
Disadvantages of a debt management plan
• Debt management plans s can help with priority debts such council tax, government fines or secured loans.
• When under a debt management plan it will affect your credit rating, whether it be long term or short term.
• Creditors may not agree to a repayment plan, although most will do as they know they will be getting more back than if a person went bankrupt.
• Due to the term the debt is being paid you could end up having to pay a lot more back
• Creditors do not legally have to stop charging interest, so it is at the discretion of the company.
Who Can Have A Debt Management Plan?
Debt management program may not be for every one, it is dependent on a number of factors. For people with severe debt and only small amount of disposable income, they may be advised to other solutions for example IVA,s or bankruptcy. An IVA’s is a independent voluntary arrangement, it is a legal agreement with you and your creditor. In most cases to qualify the debt needs to be over £15,000 and owed to at least two creditors. When choosing this option rather than the debt management plan some of the debt may be written of by the creditor. IVA’ have quite a severe impact on your credit rating.
There are free confidential helplines that can advise you on your best possible route to get out of debt and whether a debt management plan is right for you.

Author's Bio: 

I'm Emily R. Smith a blogger, and a mother of two little daughters. I have more than 10 years of experience in cooking and planning meals for patients based on their medical condition and needs. Besides taking care of my kids, I usually spends time writing about the countries that I has been to, the cultures that I has experienced, and the foods that I has tasted.