By Tim Corfield.
Whenever I hear a discussion in the media about personal debt I hear the names of ‘debt charities’ enthusiastically put forward by the presenter as the recommended organisation that any individual with financial difficulties should contact.
Putting fees and costs aside for a moment, what is the most important aspect of advice for someone with debts that they can’t cope with? In my view, it’s getting the advice right!
I recently met Bev and her husband Pete. Their accountant recommended that I spoke to them about their limited company. The discussion inevitably went into their personal financial affairs. Bev told me that she had sought advice from a debt charity some years ago and entered a Debt Management Plan (DMP) which she has now been in it for around four years – with the prospect of it continuing for a further ten years. There was no discussion about an Individual Voluntary Arrangement (IVA).
The problem with a DMP is that;
It isn’t legally binding and any creditor at any time can ‘jump the gun’ and take action – such as taking a charging order on a property.
No interest or capital can be legally written off and the debt simply stays with the debtor and in the majority of cases we come across, goes up!
Bev pays into the DMP £200 per month and jointly owns with Pete their home in which there is equity of around £30,000. I would have recommended an IVA which would have completed in no more than six years with the final years contributions being accepted in lieu of the property equity!!
Good advice? Awful advice? Griffin & King are debt advice experts.
At Griffin & King we rarely recommend DMP’s. They should only be used as a short term solution – perhaps to help a debtor through divorce, illness or redundancy – and by short term I mean months not years! If a debtor has a real debt problem the answer is usually a debt relief order, bankruptcy or an IVA.
And on the subject of fees and costs, the debt charities don’t charge for ‘advice’ or any aspect of a DMP. IVA’s are done on normal commercial fees. This is just the same as the charge structure at Griffin & King.
Hmm, where does that leave us? Who bankrolls the debt charities? Why does there seem to be a bias towards DMP’s?
We have assisted many people with debt relief orders – view our testimonials here.
If you would like further information on personal debt solutions please contact Griffin & King Insolvency Practitioners on 01922 722205, and speak to Tim, or Janet. You can also contact Janet by email on firstname.lastname@example.org, or by text or calling on 07545 806531.