COVID-19 hasn’t just had an impact on the nation’s physical health, it’s also hitting our financial health. Many businesses, the self-employed and individuals have seen incomes decrease dramatically without expenditure always following the same trend. Many had pre-existing debts that they were comfortably paying off out of their income before the virus struck.
Sadly, many will find themselves confronted by debts they are struggling to pay. Some may have creditors demanding their money or threatening court action. Rather than opting for insolvency or a voluntary agreement – legal processes that can have implications for your credit score and future employment – there is a less formal route that might have advantages for you and your creditors.
Take Professional Advice
It’s important to stress at this point that you should always take professional advice and to do this as soon as you think you have a debt problem. The purpose of this article is to talk about your options, the most appropriate route will always depend on your individual circumstances.
The alternative to insolvency or a voluntary agreement is to enter into a debt management plan. This is an informal arrangement through which your creditors are paid an agreed amount each month for a specified period until you have cleared all or an agreed percentage of your debt.
These plans can be a good temporary solution to a short-term debt or cash flow problem. The plan will be managed by a debt management plan provider.
Debt Management Plans – What to Consider
● Plans only apply to unsecured debts. They cannot be used for debts secured against property, vehicles or other physical assets.
● Future income and cash flow. If you won’t have enough surplus money each month to keep up payments, the plan is a non-starter.
● Plans are voluntary and not legally-binding. Creditors don’t have to accept them and may still demand payment of your debt in full or take legal action against you for recovery.
● It may be possible under the agreement for creditors to freeze or forego interest or fees on your debt.
Debt management plans will not be suitable for all but they are worth considering. They could bring your finances under control and give you a route to clearing your unsecured debts in a less formal way.
If you have any concerns about debts, whether personal or business, Powells Law can advise you on your options. Worrying won’t help, getting the right advice will. Contact 01934 623501 to enquire about debt management plans or email helpforyou@powellslaw.com or helpforyourbusiness@powellslaw.com.
