< Back to previous page

Debt management plans make people "slaves to their debts"

Published on 5 Mar 2010 under category: legal

Debt management plans (DMPs) turn people into "slaves to their debt", according to the insolvency trade body.

Research from R3 found that over a quarter of people (26 per cent) take a decade to clear their borrowings.

The plans, more suitable for short-term debts, usually have interest charged on them.

It also found that 30 per cent of people who are currently bankrupt or in an individual voluntary arrangement have previously been on a debt management plan -indicating that the schemes may make people worse off.

Peter Sargent, president of R3, said: "The volume of those who go from DMPs into a formal insolvency procedure suggests that, in some cases, DMPs prolong distress when another procedure would have been more appropriate to start with."

Furthermore, people may be put on repayment schemes without being offered alternative advice.

A third of individuals (35 per cent) surveyed said that no other options were discussed for dealing with their debts and just under a quarter were not asked for any proof of their income or expenditure when they approached the DMP provider.

If you require advice on Insolvency and Bankruptcy please call us on +44 (0)20 7831 0101 and ask for Katherine Sillett.