The Debt Industry Explained

There any numerous companies who will offer to help people help with their debt problems. It’s hard to open a newspaper without seeing an advertisement for an organisation offering debt help. The majority will try to guide you down a particular path, which is their area of expertise. In general, these companies fall into the following categories:

Debt Management Companies

These companies simply prepare a schedule of debts and then approach each creditor to set-up a reduced payment plan based on disposable. Plans like this can take 10, 20 or even 30 years to pay off the debt and the creditors are free to take enforcement action against the debtor at any time. Unless the debts can be cleared over a period of say up to 10 years then debt management should not be considered a final solution.

Companies who set up these plans earn their money either by taking a fee each month to distribute money to the creditors or they receive ‘donations’ from creditors. Either way it should be kept in mind that they have a long term financial interest in the continued indebtedness of their client.

Insolvency Practitioners

For personal debts Insolvency Practitioners can only offer an IVA (Individual Voluntary Arrangement) as a solution and therefore many Insolvency Practitioners tend to concentrate solely on commercial restructures, administrations and liquidations.

On-Line Debt Management Companies

Everything is done on-line so it almost impossible for your situation to be fully understood. Generally, these sites either offer Debt Management or feed leads through to companies that only offer IVA’s. Be mindful of companies that have an on-line only decision process, every case is unique and should be treated as such.

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