Debt Management

What Is Debt Management?

For those in serious debt trouble, with real difficulty meeting monthly repayments, seeing arrears stacking up, and without any real prospect of securing a consolidation loan, then Debt Management could offer a way out.

At its simplest, it involves admitting defeat in the endless fight to keep up to date, and contacting your creditors to ask them to come to a new arrangement that is more financially realistic.

This can either be done by yourself, or through a dedicated debt advice agency (who will normally charge a fee for the service).

Will It Work?

Faced with the prospect of a customer defaulting on a credit agreement, a company may decide that forcing bankruptcy is the only option they have. However, this is rarely a satisfactory outcome for anyone concerned, and your creditors face the real risk of not having any of the debt repaid even after pushing the debtor into insolvency.

For this reason, most creditors will at least be open to the idea of drawing up a new repayment plan that means they get at least a small amount each month, rather than losing the money altogether.

You may also be able to secure a freeze on interest charges, meaning that you only have to pay back the debt that’s already built up rather than the debt spiralling upwards.

Using a Debt Management Company

Although there’s no reason you can’t draw up your own management plan, most people in financial trouble would find this a rather intimidating option, given the amount of negotiation with creditors that is involved. A debt management company will take over these negotiations, and because of their impartiality and experience, are in any case more likely to arrange a positive outcome.

There’s also the advantage that they will handle distributing the payments to your creditors on your behalf, with you having to make only one affordable payment direct to the agency each month. After any period of debt stress, this would obviously be rather attractive!


The use of a third party to negotiate on your behalf will almost certainly mean part of your repayments will be swallowed up in fees, which may or may not be worth it to you, especially as there is no legal need to use a management company. Whether you’re happy to pay or not really comes down to whether you feel you can handle the process yourself, or whether the psychological benefits and lifting of stress outwiegh the cost.

You may also be able to secure the services of a debt charity which can help you for free, although resources in these organisations can be stretched thinly.

Another thing to bear in mind is that by effectively ripping up your credit agreements and starting again, your credit rating will be severely damaged. However, most people who get to the stage of considering debt management will already have seen significant negative entries on their record, so this may not be too important in reality.