A quarter of people on debt management plans will take at least a decade to clear their borrowings, research has shown.
Insolvency trade body R3 said many people are becoming "slaves to their debts", as in 26% of cases it will take 10 or more years to repay what they owe.
Under debt management plans (DMPs), people struggling with debts agree with their creditors to repay a set amount each month.
But unlike formal insolvency agreements, none of the debt is written off and interest is typically still charged on it.
R3 said it is concerned that the plans are being offered to people for whom they are not appropriate, as they are intended to be short-term repayment plans.
Peter Sargent, president of R3, said: "DMPs can play an important role in offering a manageable solution to individuals who are able to pay back their debts.
"However, the sheer length of some plans indicates that the amount of debt these individuals have is too large for a DMP. By entering into these inappropriately lengthy plans people become slaves to their debts."
The group said its research also showed that 30% of people who are currently bankrupt or in an individual voluntary arrangement (IVA), under which interest on debt is frozen in exchange for a set amount being repaid each month for five years, had previously been on a DMP.
Mr Sargent said: "The volume of those who go from DMPs into a formal insolvency procedure suggests that, in some cases, DMPs prolong distress when another procedure would have been more appropriate to start with."
A third of people on one of the plans said other options for dealing with their debt were not discussed, while 22% said they were not asked for proof of their income or expenditure before the plan started.
As a profession we are well aware that a lot of people start off in a DMP but will eventually plump for an IVA. Some would say that this is in the financial interests of some firms who offer both solutions, others would say that the DMP gives a good grounding for whether payments are going to be affordable in the long run.
If IVAs are to become the best solution for people whose debts would take longer than five years to repay, creditors need to get a reality check about expenditure levels and allowances. I am running some quite frankly ridiculous arguments with one of the creditor representatives at the moment about fuel expenditure, where they are taking no account of the journeys my clients make to work. Things like this will turn more people to bankruptcy or never ending debt management - where they genuinely want to pay but refuse to become a slave to their debts.
Hi
Crazy, if you need x amount to get to work then that is what you must be allowed. I can spend 130 pound per month just running the kids around etc and I work from home.
DMPs are useful and to some people the only viable solution, even if it is only short term. However I think it is true to say that there are some companies that are putting valid IVA clients into six month DMPs as a matter of course and this needs to be stopped
Regards
Your hair would curl Andy if you had heard some of the discussions my staff had held this week with one of the main creditor representatives. I am afraid if this carries on it is going to lead to IPs putting through false expenditure simply to give their clients a fair deal. I am going to make representations to R3 as enough is enough.
MelanieGiles wrote:
I am running some quite frankly ridiculous arguments with one of the creditor representatives at the moment about fuel expenditure, where they are taking no account of the journeys my clients make to work. Things like this will turn more people to bankruptcy or never ending debt management - where they genuinely want to pay but refuse to become a slave to their debts.
Should I be basking in the notoriety?! [:p] Shouldn't laugh but, as you say, it is ridiculous.
The figures do seem to suggest that quite a lot of people are ill advised in the 1st place regarding the best solution for them. Another advert to shop around before you choose what you are going to do about your debts,although I strongly believe that the majority of people will always go with the 1st company that offers them a way out!!!
Paul
Discharged today the 8th feb 2012. View is much brighter now.
Continuing to rebuild our credit worthiness.
Hi
Exactly
That is why the advice that people receive in the very first instance must be the best advice for that person rather than the most profitable solution for the company giving the advice. This is where regulation of the DMP industry will be invaluable
Regards
How ridiculous to try and put a stop on necessary expenditure. Do these people not travel themselves and see how much fuel costs these days?
I was fortunate with my DMP, never had any problems with our expenditure. So far with the IVA it is the same, although our case worker has said that we are on a very basic I&E. We can manage though.
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
Totally ridiculous! I'd love to know how far some of their employees travel each day!
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
i have to travel 43 miles there and 43 back.
my company shut my local depot down and i was picked to continue in there employment abet 86 mile round trip.
i do get to car share so its not that bad that i dont get a massive amount allowed for in petrol but i can get by.
like you have said they think its ok to be high and mighty over expenditure when they dont have to live by them
cc received 6th January 2014 now upwards and onwards
Its not like you can always be overly choosey when it comes to where you work compared to where you live!!!
I am lucky in that its 7 miles to work and 7 back,and takes 10 mins in the peak of rush hour!!!
Paul
Discharged today the 8th feb 2012. View is much brighter now.
Continuing to rebuild our credit worthiness.
