At what stage in a debt management plan are debts written off?

28 May2021

Debt management plans are designed to help you repay your unsecured debts at a pace you can afford.

In other words, you debts wouldn't be written off in a debt management plan. You repay the full debt - you just pay it more slowly than you would have if things had worked out as planned.

So when does a debt management plan end?

If you are eligible for a debt management plan, you (or a debt professional acting on your behalf) will negotiate a new payment plan with your lenders. If it's agreed, this will involve you paying a lower amount each month over a longer period of time.

Your debt management plan will not end unless / until:

  • You pay off all your unsecured debts in full.
  • Your financial circumstances change for the better, and you can resume making the full payments that you originally agreed with your lenders.
  • Your financial circumstances change for the worse, and you choose to take part in an alternative debt solution.
  • You or your lenders decide that it's not working out and that you need to find a different way of sorting out the problem.

What happens during a debt management plan? Find out here.

What kind of debt solution writes off debt?

There are several debt solutions that can write off your unsecured debt.

  • An IVA (Individual Voluntary Arrangement) can allow you to make lower, more manageable payments for (usually) five years - after which any remaining unsecured debt will be written off.
  • If you enter bankruptcy, your debts can be written off once you are discharged (usually after one year).
  • A DRO (Debt Relief Order) is an alternative to bankruptcy if you have very little disposable income (under 50 per month) and no expensive assets (no single asset worth over 300, with an exception of a car worth up to 1,000). If you meet all the requirements for a DRO, your unsecured debts will be frozen for a year, after which they will be written off if your finances haven't improved enough.

To find out more about different kinds of debt solutions, visit this page.

It's worth bearing in mind, however, that these solutions are only available if you are really struggling with your unsecured debts - and that your debt won't be written off if you don't stick to your side of the agreement.

They are only suitable for people who cannot see themselves being able to repay their debts in any realistic amount of time.

Debt management is designed for people who would be able to regain control over their monthly debt repayments if they were a little smaller.

Are there any disadvantages?

All of the debt solutions mentioned in this article will have a negative impact on your credit rating. If you enter a debt management plan, paying debt off over a longer period of time may give interest more time to accumulate. This means you could end up paying more overall. It may be possible, however, for your lenders to freeze interest and charges on your debts.

Despite their disadvantages, if you cannot see a way out of your debt problem, a debt solution may be the best way for you to tackle your unsecured debts.

If you're not sure which debt solution could be right for you, fill in our debt solution finder.

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Tags: Debt management plans, debt, unsecured debt, debt management, DPP, debt payment program, IVA, Individual Voluntary Arrangement, bankruptcy, DRO, debt relief order, credit rating

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