Although Debt Management Plans (DMPs) have been considered a good alternative to bankruptcy or Individual Voluntary Arrangements (IVAs), new research has shown that one in four people who sign up to a DMP will be paying for it for more than ten years. DMPs are unregulated and were originally introduced as a means of reducing debts in the short term, but there is no limit on the payment period or amount of debt that can be incorporated into one. Because of this lack of structure, individuals are entering DMPs with large debts, which they agree to pay over a long period of time.
It is likely that some of these people have been poorly advised and the research supports this conclusion. Over a third of individuals reported not being offered other options, such as an IVA or bankruptcy, while nearly a quarter of organisations failed to take proof of income and expenditure before setting up the plan. It seems incredible that this could happen, given that DMPs must be tailored to an individual’s needs to be an effective method of debt repayment. It is no wonder, then, that nearly half of all insolvency practitioners surveyed reported seeing DMPs fail because the repayment amounts were set at too high a level.
A third of people in IVAs and people with undischarged bankruptcies had previously addressed their debts by way of a DMP.
If you are facing debt problems or are considering a DMP, seek professional advice without delay. A specialist insolvency practitioner can advise you as to all your options and will be able to give you the best advice tailored to your specific circumstances.
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