How long do Debt Management Plans take to Clear Debts?

On September 7, 2012, in News, by Lewis Alexander
  • free credit report UK from ExperianAre you trying to find out how long it would take you to clear your debts with a debt management plan or company?
  • Would you benefit from understanding how others have succeeded or failed when trying to clear debts with a debt management plan?
  • Have you checked the main reference points to identify if a company you are intending to use is a bona fide debt service?

First off, it is important to accept that clearing debts with a debt management plan is not a 5 minute or overnight solution.  Even if you were eligible to declare yourself bankrupt and wipe off any debt you may have, that bankruptcy process will still require paperwork being completed that goes through your local county court and can take a couple of months to conclude!

There are NO overnight solutions to clear personal debts, one could argue that if given a debt consolidation loan, that could act as an overnight solution if the individual used it to immediately consolidate but most people who qualify for a debt management plan do not qualify for a debt consolidation loan, fact!

Here at Lewis Alexander Financial Management, we are proud to have been helping UK consumers clear personal debts with debt management plans for the last decade.

The following example information explains different outcomes of clients on a Lewis Alexander Debt Management Plan.

“Client A” joined Lewis Alexander in October 2006, this client has 2 payments left to make to complete their debt management plan, it will have taken this client 6 years or 72 months to pay off approximately £12,500 of unsecured personal debt. With our fee of £35 per month included within their monthly repayment of £200 per month, they would have had £165 per month distributed amongst their creditors by Lewis Alexander on an industry accepted pro-rata basis, this means whichever creditor is owed the most gets the highest relative share of the clients monthly disposable income. The total repaid by this client would be approximately £15,000 which when compared to other debt solution costs is relatively reasonable.

A debt relief order would not have been possible for this client as they have assets that exceed £300 (the debt relief order was also not available in 2006!)

An IVA or Individual Voluntary Arrangement would have been an option but the client could afford to repay the debt so they were not insolvent. They also protected their credit rating from registered insolvency and the opportunity cost of this was that they repaid the full amount they owed with a debt management plan instead of having a percentage of debt written off, which is what an IVA offers.

“Client B” joined Lewis Alexander in December 2003 and has 13 payments left to make to complete their debt management plan, it will have taken this client approximately 10 years or 120 months to pay off approximately £41,000 of unsecured personal debt. With our fee of £65 per month included within their monthly repayment of £400 per month, they would have had £335 per month distributed amongst their creditors by Lewis Alexander. The total repaid by this client would be approximately £48,000 which when compared to other debt solution costs is relatively reasonable.

A debt relief order would not have been possible for this client as they owe more than £15,000 and have assets that exceed £300 (the debt relief order was also not available in 2003!)

An IVA or Individual Voluntary Arrangement would have been an option based on timescales but the client had a house worth £200,000 and no mortgage, the IVA in this case could have meant the client having to re-finance their property to release equity to increase the overall contribution back to the respective creditors. The IVA would have also been of greater detriment to the credit rating than an informal debt management plan.

If an individual resides in Scotland, a Protected Trust Deed is the Scottish equivalent to an IVA.

The average unsecured debt that people we speak to have is approx £20,000.

51 is the average number of monthly payments people make to conclude a Lewis Alexander debt management plan.

Some debt management plans are never completed, this can be due to but not limited to the following reasons;

  • Client has had a further change in circumstances and can no longer afford to repay.
  • Client is not committed to clearing debt and is just looking for another delaying tactic.
  • Client has gained friend / family assistance and they are in a position to clear the debt in full.
  • Client has won the lottery! (Believe us, it happens!)

New clients requiring debt management plans at present are recorded as having lower debt values when compared to the past 10 years. This is due to most people having much smaller loans but more of them, for example, too many payday loans and short term cash loans.

Mortgage owners are becoming increasingly vulnerable to financial problems especially those that are suffering further changes to personal circumstances. Wages are not going up but living costs are and most mortgage owners do not take advantage of reduced interest rates and continue to spend what they should be benefiting from.

This cannot be sustained if mortgage owners have a further negative change in circumstances or if interest rates go up.

What to check about a company you intend to select to help you clear personal debt.

  • Does the debt service have a current /valid consumer credit license issued by the Office of Fair Trading? check here
  • Is the personal debt consolidation service registered at Companies House in the UK? check here
  • Has the debt consolidation company registered with the Information Commissioner under the Data Protection Act? check here

If you are currently struggling to identify which personal debt consolidation solution is right for you to explore further or possibly start, please call our personal debt helpline today in confidence.

  • Call 0800 018 6868
  • Lines are open 24 hours / 7 days
  • From a UK land line calls are usually free.
  • From mobile phones it may be less expensive to call 0161 872 3383.
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