Can debt management help with priority debts?

Written by admin on December 6th, 2010

A debt management plan can help you regain control of your finances. With debt management professionals taking care of your unsecured debts, you could make a single, lower monthly payment – and let the debt management company deal with all negotiations with your unsecured creditors on your behalf (such as asking them to accept lower payments that you can afford).

But debt management plans don’t just help you stay on top of your non-priority debts – they could help with your priority debts too, such as your mortgage/rent, utility bills and Council Tax.
Debt management and priority debts
Your priority debts are – as the name says – your most important ones. This doesn’t mean your non-priority debts are ‘unimportant’, but the consequences of missing payments to priority debts can be much worse.

Although a debt management plan only deals directly with your non-priority debts, it can also help you stay on top of your priority debts.

Your non-priority creditors will be informed how much you need to spend on your priority debts (rent/mortgage, utility bills, secured loans, etc.) and your essential (day-to-day) living costs (food, clothing, petrol, etc.) every month.

More often than not, unsecured creditors will understand that you can’t be expected to give them any of this money. They may agree that the best (and most suitable) way for you to repay your debts is to divide your ‘disposable income’ (the rest of your income) among your unsecured creditors, based on how much you owe each of them (this is known as a pro rata payment).

This means your credit/store card bills – for example – won’t be taking up the money you need for your essential expenses.

A note about debt management
Please note that:
•    Repaying any debt more slowly – whether or not this is done as part of a debt management plan – will damage your credit rating for six years.
•    Lenders aren’t obliged to agree to any changes to your repayment plans.
•    Debt management is only an option if you can’t make your payments – if you can stay on top of your payments, your creditors will expect you to.
•    Repaying any debt more slowly can add to the overall cost – if your lenders don’t agree to freeze interest, you’ll pay more as your debt will be accruing interest for longer.

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