Baines & Ernst Guide to Debt Management Plans

Transcription

1 Baines & Ernst Guide to Debt Management Plans

2 Contents Introduction 1. Introduction 2. What is a Debt Management Plan? 3. How a Debt Management Plan works 4. Do you qualify for a Debt Management Plan? 5. Other debt solutions available 6. FAQs 7. How we could help you The last few years have certainly been a testing time for UK families as a result of the recession. Many people have suffered job losses through redundancies and extended periods of unemployment, while those holding onto their jobs have endured pay freezes. And while we try to keep our heads above water, we re seeing less money in our pockets at the end of the month as our cash is spent on skyrocketing utility bills, increased prices at the pumps and food inflation shooting up to 6.3% - that s three times the rate of the world s seven wealthiest countries! It s little wonder then why people throughout the country are feeling the pinch and struggling to make debt repayments that they were once able to afford. How to get debts under control If you re worried about your finances and are struggling to repay your debts, you re not alone. At the end of December 2011, personal debt in the UK stood at a staggering trillion, with the average household debt (excluding mortgages) at 7,948.* Many people in debt think that the only option available to them is Bankruptcy, and while this is true for some people, it certainly isn t true for all. This debt guide aims to provide you with an insight into Debt Management Plans and how they are helping people find an affordable way to repay their debts. So we ll be telling you: What a Debt Management Plan is How a Debt Management Plan works What the qualifying criteria is We will also provide an overview of other debt solutions available to you so you have a better understanding of services that could help you get out of debt. *Stats: Credit Action Baines & Ernst Debt Management Plan Guide Page 1

3 What is a Debt Management Plan? If your financial situation is stretched and you re struggling to make full repayments on your debts, then a Debt Management Plan could help you to clear debts at a rate that s more manageable within your budget. A Debt Management Plan is a solution that enables you to consolidate debt repayments into one affordable monthly payment that s based on what you can afford now not the monthly amount that was originally agreed with your creditors. BAINES & ERNST WERE A GREAT HELP AT A REALLY DARK TIME IN MY LIFE. THEY GAVE ME PEACE OF MIND Designed to suit you Before a repayment plan is created for you, a full review of your current expenditure against your income will be carried out. This will ensure that you have enough money every month to pay for household bills, rent / mortgage, travel, food and other essential outgoings. Affordable repayments Once your affordable repayment rate has been calculated, you will only have to make one payment into your Debt Management Plan every month which is distributed to the companies you owe money to. Flexibility A Debt Management Plan is not legally binding so the flexibility of a Plan means that you can increase repayments if your financial situation improves, which will help you to clear your debts in a shorter amount of time. Interest and charges frozen In 84% of debts managed by Baines & Ernst, interest and charges are frozen. Although this is not always guaranteed, we will always do our best to get these charges frozen on your behalf. Cut creditor pressure & reduce stress As your debts are being managed on your behalf through a Debt Management Plan, creditors no longer need to contact you about what you owe. If your creditors have any questions, they can speak directly to us. Clear debts Providing you make payments into the Plan every month, then you will clear debts on successful completion. WRITE OFF DEBT A Debt Management Plan won t allow you to write off debt, but it will help you to repay what you owe at an affordable rate. REPAYMENT PERIOD The duration of a Debt Management Plan varies from person to person as it depends on how much debt the individual has and how much they can afford to repay. CREDIT RATING Your credit rating will be affected in the medium to long term and you could find it difficult to get credit in the future. If you have already missed or made late payments, then your credit rating may already be affected. DEBTS Only unsecured debts can be included in a Debt Management Plan, this means personal loans, store cards, credit cards, bank overdrafts and catalogue accounts. Secured debts such as mortgages, HP loans, secured loans, council tax, utility bills, TV license or student loans cannot be included but they will be all taken into account before calculating Debt Management Plan repayments. Baines & Ernst Debt Management Plan Guide Page 2

4 How a Debt Management Plan works Step 1: Income and expenditure Repaying debts is a priority but so is making sure you have enough money to pay for all your essential bills and living expenses. Falling behind on bills such as rent / mortgage, gas, electric and council tax can cause major problems financially, so it is essential you have enough money to pay for these bills as well as food, travel, clothing and other living costs. The income and expenditure review will help you to identify how much you need each month to pay for the items mentioned above and work out a reasonable repayment rate that is much more manageable within your budget. Step 2: Negotiations with your creditors One of the most important stages of a Debt Management Plan is the negotiations with creditors, as this is when an affordable repayment rate is agreed. And this is where we step in. As part of our Debt Management Plan service, we handle all negotiations to ensure our customers get the lowest, most affordable repayment rate for their circumstances. We will also request that creditors freeze interest and charges and set up a monthly repayment structure for you. Step 3: Monthly repayments Once your debts have been consolidated into a lower, more affordable amount, you simply need to make one payment into the Plan each month and this will be distributed to those creditors included in the Debt Management Plan. This means you ll have one payment to make as opposed to several repayments to several creditors making it easier to manage your finances. KEEPING OUR CUSTOMERS UP-TO-DATE Debt Management Plan customers receive regular statements so that they can keep up-to-date on their debt repayments. They also have 24 hour access to an online statement facility and undergo a yearly review to make sure they repay their debts at a rate that is tailored towards their current circumstances. Baines & Ernst Debt Management Plan Guide Page 3

5 Do you qualify for a Debt Management Plan? To qualify for a Debt Management Plan, you must have: Two or more creditors (for example: credit cards, payday loans, overdrafts, store cards) Unsecured debts over 2,000 Proof of income If you re worried about your financial situation and feel like dealing with your debts alone is becoming a struggle, a professionally managed Debt Management Plan, could be the right solution for you. Debt Management Plan Breakdown Below is an example of how a Debt Management Plan could make your debts easier to manage CREDITOR 1 9,200 CREDITOR 2 5,200 CREDITOR 3 2,000 CREDITOR 4 1,500 TOTAL 18,100 Monthly repayment before DMP 600 WITH A DEBT MANAGEMENT PLAN New monthly payment 260 Monthly Saving 340 (An example projected case: assumes circumstances stay the same, DMP is adhered to and succesfully completed) BAINES AND ERNST HAVE MADE SO MUCH DIFFERENCE TO MY LIFE. I CAN NOW MOVE ON AND NOT FEEL THE STRESS OF OWING SO MUCH MONEY! Baines & Ernst Debt Management Plan Guide Page 4

6 Other debt solutions available: IVA A Debt Management Plan can be an ideal solution for many people, but not everyone s circumstances are the same. There are a number of alternative debt solutions that have been designed to help people with various levels of debt - so if a Debt Management Plan isn t the best option for you, you could qualify for one of the other solutions mentioned in this section... An Individual Voluntary Arrangement more commonly known as an IVA is a legally binding solution that helps people who are struggling financially to repay debts at a more affordable rate. IVAs typically last for a period of 5 years. During this time, creditors included in the Agreement will freeze interest and charges and write off any remaining debt at the end of the IVA. You are also protected from your creditors petitioning for your Bankruptcy and they are no longer allowed to contact you about your debts. If you are a homeowner, you may have to release equity in the final year of the IVA to help repay your creditors but this will be discussed with you before you progress with an Arrangement. WITH AN IVA YOU COULD FREEZE INTEREST AND CHARGES AND WRITE OFF DEBT AT THE END OF 60 MONTHS WITH AN IVA YOU COULD: Reduce monthly repayments Freeze interest and charges Write off unsecured debts included in the IVA Be free from debt usually at the end of 60 months DO YOU QUALIFY? IVAs are normally suitable for people who have: Three or more creditors (for example: credit cards, payday loans, overdrafts, store cards) Over 15,000 worth of unsecured debt Problems meeting repayments Proof of income Baines & Ernst Debt Management Plan Guide Page 5

7 Other debt solutions available: Bankruptcy Out of all the debt solutions available, Bankruptcy is perhaps the most well known. This could be because we often hear about celebrities or businesses in the public eye going bankrupt in the news. It is not unusual for people in financial difficulty to assume that the only option available to them is Bankruptcy. However, Bankruptcy should always be considered as a final resort because of the serious affects Bankruptcy can have on your life. For example you could face losing your home, valuable assets, car and in some cases your job. If you really cannot afford to repay your debts, then going bankrupt could be the right solution for you but you should always seek financial advice first and find out if your problems could be resolved through a Debt Management Plan, IVA or Debt Relief Order. BY GOING BANKRUPT, YOU COULD: Be free from debt included in your Bankruptcy Order at the end of 12 months DO YOU QUALIFY? Cannot afford to repay creditors Have a low disposable income after paying household bills and other living essentials BANKRUPTCY CAN HELP PEOPLE CLEAR DEBT BUT IT IS NOT THE ONLY SOLUTION AVAILABLE You should always seek advice before going bankrupt to see if your financial problems could be solved with a Debt Management Plan, IVA or Debt Relief Order. Baines & Ernst Debt Management Plan Guide Page 6

8 Other debt solutions available: Debt Relief Order A Debt Relief Order, also called a DRO, is an alternative to Bankruptcy and is available to people who have a very low disposable income and are struggling to repay debts. The duration of a Debt Relief Order is typically one year. During this period, none of the creditors included in the DRO will be able to take action against you to recoup money owed to them. At the end of the year, you ll be free from all the unsecured debts listed in the order. Alternative to Bankruptcy: A DRO is an alternative to Bankruptcy for those with little assets or disposable income. The Debt Relief services is provided FREE of charge by Baines & Ernst: All you have to pay is a one-off fee of 90 to the Insolvency Service. Clear debts: All unsecured debts included in the DRO will be cleared after 12 months. No monthly charges: We do not charge for the DRO service so you don t have to pay any monthly fees. No court appointments: Unlike Bankruptcy, you do not need to book an appointment at the courts to process your application we take care of everything on your behalf. DO YOU QUALIFY? Debt Relief Orders are normally suitable for people who: WE ARE REALLY HAPPY DEALING WITH BAINES & ERNST, YOU'VE BEEN GREAT. YOU TAKE THE STRESS OFF ME, IT'S HELPED US ALL ROUND Are on a low income Have 50 or less available from your income after deducting general living costs and bills Are unable to repay debts Have unsecured debts that do not exceed 15,000 Do not own valuable goods worth more than 300 or a car worth more than 1,000 Have not had a Debt Relief Order within the last 6 years Are not involved in another formal insolvency procedure when applying for a Debt Relief Order Baines & Ernst Debt Management Plan Guide Page 7

9 Other debt solutions available... Protected Trust Deed A Protected Trust Deed is a debt solution that helps people living in Scotland clear debts. With a Protected Trust Deed, you could reduce your monthly repayments interest and charges will be frozen and any debts that still exist at the end of the Deed period (which normally lasts 3 years) will be written off. A Protected Trust Deed is a legally binding solution that will protect you from Sequestration (Bankruptcy) providing you keep to the terms of the Deed. WITH A PROTECTED TRUST DEED YOU COULD: Reduce monthly repayments Freeze interest and charges Write off unsecured debts included in the Protected Trust Deed Be free from debt usually at the end of 36 months Sequestration If you are a resident of Scotland and cannot afford to repay your debts, another solution available to you is Sequestration (Bankruptcy). Sequestration is a serious debt solution and should be considered as a last resort when solving your financial problems because of the affect it can have on your life. For example, you could face losing your home, valuable assets and in some cases your job. Before going ahead with Sequestration, you should seek advice and find out if your money problems could be resolved through a Debt Management Plan or a Protected Trust Deed. WITH SEQUESTRATION, YOU COULD: Be free from debt included in your Sequestration at the end of 12 months DO YOU QUALIFY? Protected Trust Deeds are available to people living in Scotland who have: Substantial unsecured debts Problems meeting repayments Proof of income DO YOU QUALIFY? Cannot afford to repay creditors Have a low disposable income after paying household bills and other living essentials Live in Scotland Baines & Ernst Debt Management Plan Guide Page 8

10 Frequently asked questions Can I cancel a Debt Management Plan? You can cancel with us at any time without any further charge providing you give two weeks written notice. Do creditors always accept reduced payment offers? Creditors must treat you fairly, so if you make a reduced offer of payment, your creditors have to take your circumstances into account when deciding what to do. Will my creditors continue to contact me? A Debt Management Plan is not legally protected, which means creditors can still contact you so it isn t unusual if they do. If you do not want to speak to them regarding your debts, simply refer them to us and we will handle their enquiries. Will my credit rating be affected if I get Debt Management Plan? Yes, your credit rating will be affected in the medium to long term if you get a Debt Management Plan. This is because you will be repaying your debts back at a rate that is lower than what you originally agreed with your creditors. Your credit rating will also be affected if you get an IVA, a Debt Relief Order or go Bankrupt. If you have already missed or made late payments before getting a debt solution, then your credit rating may already be affected. Can I take out a Plan if I am a homeowner or tenant? It makes no difference whether you are a tenant, homeowner or still living with your parents, you can still apply for a Debt Management Plan. Do I have to be in full time employment to apply for a Debt Management Plan? No. As long as you have proof of income, you can still apply for a Debt Management Plan. Is this a loan? No, a Debt Management Plan is not a loan. We neither lend you money, nor pay off your debts. Your payment plan is a solution that allows you to repay your creditors at a monthly rate you can afford. If you do not make payments into the plan, we cannot make payments to your creditors. Will I be credit checked before acceptance? No. Since we do not lend you any money, we do not need to credit check you. FOR A NO-OBLIGATION FINANCIAL REVIEW, SPEAK TO OUR FRIENDLY EXPERTS IN CONFIDENCE TODAY Baines & Ernst Debt Management Plan Guide Page 9

11 Frequently asked questions (continued) Does the Plan cover all of my debts? No. A Debt Management Plan can only cover your unsecured debts. Examples of debts that can be included in a Plan are: Personal loan Store card Credit card Bank overdraft Catalogue account Secured loans and bills cannot be included in a Debt Management Plan, so you will have to ensure you maintain payments on these types of bills: Mortgage Hire purchase loans (car loans) Secured loans Council tax Water rates / gas / electricity bills TV license How much does the Debt Management Plan service cost? We charge an initial set-up fee (which is equivalent to two monthly payments). This initial set up fee is retained by us for setting up your plan. While negotiations are taking place, we will make a small token payment to your creditors. This means that your accounts do not go unpaid for two months. The initial set-up fee includes: Drafting a bespoke payment plan Creation of a Debt Management Plan pack Communication with your creditors, either in writing or by telephone Calculation and issue of reduced payment proposals Preparation of the financial statement Home rep visits / help with Debt Management Plan pack paperwork for completion We can arrange for a professional representative to collect the pack and any supporting documents from you. If you need help completing the information pack, our representatives will be more than happy to lend a hand. We take a monthly management fee equivalent to % of each payment you make to us, subject to a monthly minimum of 35 and a monthly maximum of 100, plus 40 per annum paid on every anniversary of a plan. Specific costs will be notified to you in advance. What are the full terms and conditions of the plan? These will be provided to you in writing prior to you entering into the agreement. A copy can be viewed at DEBT SOLUTIONS THAT ARE BUILT AROUND YOUR BUDGET AND PERSONAL CIRCUMSTANCES Baines & Ernst Debt Management Plan Guide Page 10

12 How we could help you We have helped over 100,000 people escape the pressure of debt we could help you too! Photographs of models have been used to protect client confidentiality. At Baines & Ernst our ethos is simple to help people find an affordable way to clear their debts. Every day we offer advice to people with various levels of debt who are struggling to repay creditors. So whether you want to consolidate debt repayments into an affordable monthly amount or need more information on writing off debt with a legally binding solution, we can help. As members of DEMSA, we follow their Code of Conduct as approved by the OFT, so you can be confident that we take the greatest of care to ensure our customers receive the highest standards of service and the best advice at all times. Baines & Ernst part of the Paymex Group winners of Debt Management Provider of the Year, 2010 and 2011 Finalists at the Insolvency and Rescue Awards What will Baines & Ernst do for me? As part of our Debt Management Plan service, we will: Negotiate lower repayment rates with your creditors on your behalf Request the freezing of interest and charges Distribute payments to your creditors every month Provide clear debt advice every step of the way Provide online access to statements 24 hours a day Arrange an Annual Plan Review Get in touch Our friendly team is available to provide advice on the range of debt solutions available to you. You can also complete the enquiry form on our website and well get back to you. H Call our freephone Cheaper from mobiles Request a call back, text DEBT to Baines & Ernst Debt Management Plan Guide Page 11