Single person - Debt Management Plan Debt solution case study
Summary: Single person - Debt Management Plan - this paper looks at some of the reasons that a person in debt might choose a Debt Management Plan (DMP) as an appropriate solution.
Background
William wasn't always single. 2 years earlier he and his partner had great plans for the future. They had bought their first house putting down hard-earned savings as a hefty deposit and were managing their debts and their lives rather well. The separation came out of the blue for William. Such was his emotional state that dealing with the practicalities of the fall out was not a priority. Now, 2 years later with his name still on the mortgage of the house he no longer lived in, debts mounting and unopened creditor letters taking up several draws of his kitchen table, he knew the time for action had arrived.
Am I insolvent?
After some internet research William recognised that his assets (some share of the house he had once lived in) and his car (very necessary for work - and well, everyone deserved one source of pride and joy) were worth considerably more than his £15,000 of unsecured debt. His ex-partner had spoken to him for long enough to inform that the house was on the market and half the profit when a sale took place was on its way to him. Bankruptcy and an IVA were inappropriate, not least because Williams's assets being more than his debts meant that he was not insolvent. Furthermore with a lump sum due at some future point, he knew he could finally sort out these debts.
Buying time
Some DMP's last a long time. Essentially a DMP is a means of repaying debts through a plan where one regular payment is made and divided up between creditors proportionately according to the size of their debt relative to the total debt. The plan is usually administered by a DMP company. Creditors often agree to freeze all interest charges, allowing the capital owed to be repaid over a period of time. However some DMP's are entered in order to keep the debt under control, and to repay something until a change of circumstances ends the plan. For William the change would occur when the house sale went through.
The DMP process
With the help of a specialised company, William was able to work out how much he could realistically afford, and this payment was to become a monthly repayment in a DMP. The company acting for him did all the setting up and managing of the plan. Whether long term or short term, a DMP can provide a means of making affordable payments to creditors, where every creditor is treated equally, whilst at the same time offering flexibility to the debtor to adjust or end the plan according to changing circumstances.