Typically, a debt management plan is suitable for people with multiple debts who are unable to meet the required monthly payments. However, a debt management plan is not suitable for everyone. You should always speak to a professional debt adviser before making a decision – they may advise you on another debt solution that meets your needs more effectively.

What other debt solutions should I consider?
There are a number of other debt solutions that can help you to avoid court action from your creditors, as well as the prospect of bankruptcy.

Debt consolidation loan
This is, in short, a new loan designed to repay your existing debts, after which you will repay your new creditor in single monthly payments.

Not only can this simplify your finances, it may also be possible to reduce your outgoings by spreading out your repayments. However, a longer repayment period means paying interest for longer, which means you could pay more overall.

That said, you could make a saving on the interest you pay if you are consolidating high-APR debts. As long as the interest rate on your debt consolidation loan is lower than the rates on your original debts, there’s a good chance you could save money.

You must be confident that you can afford your new payments before you take out a debt consolidation loan. If you can’t, then another debt solution may be more appropriate.

IVA (Individual Voluntary Arrangement)
An IVA is a legally-binding debt solution which allows you to avoid bankruptcy by agreeing to pay off a percentage of your debts at a more manageable pace, after which your remaining debts will be considered settled.

You will initially work with an Insolvency Practitioner to draw up an IVA proposal, which will then be sent to your creditors. Creditors accounting for 75% of your total debts must approve this proposal for the IVA to go ahead.

You will then make regular monthly payments to your Insolvency Practitioner, who will divide the money between your creditors. This normally continues for five years.

Be aware that if you’re a homeowner, you may have to release some of the equity in your home in the 54th month of your IVA (half way through the final year). You may also be required to contribute at least half of any additional income during your IVA, including pay increases, overtime pay and bonuses.

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