700,000 people in Debt Management Plans
It is currently estimated that the total number of insolvent individuals in the UK who have entered into Debt Management Plans is now over 700,000*.
The figures dwarf the officially recorded government figures which show the combined total of people in Individual Voluntary Arrangements and declared Bankrupt which amounted to 190,000 by the end of 2008.
The number of Debt Management Plans is also reported to have increased by an astonishing 17% in seven months (from August 2008 to February 2009).
Debt Management Plans are informal arrangements made with creditors and are not officially reported anywhere. They are not always the best solution for those in financial difficulty as, unlike other statutory procedures, there is no debt forgiveness, no freeze on interest and they are not legally binding on creditors.
The survey also reveals that 18% of those in a Debt Management Plan stated the DMP was due to last longer than ten years, with another 27% didn’t even know how long the plan was due to last.
People are often recommended to enter into a Debt Management Plan when clearly an Individual Voluntary Arrangement or Bankruptcy is in fact the right solution. People should beware taking advice from debt management companies or charities or other free money advice organisations that are funded by the banks. Always shop around for advice.
While Debt Management Plans are appropriate in some cases, they are not the only option and there are drawbacks, the most worrying being the length of the plan; effectively ‘debt slavery’.
*Source: YouGov survey, conducted in consultation with R3
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