BAINES & ERNST GUIDE TO DEBT MANAGEMENT PLANS

BAINES & ERNST GUIDE TO DEBT MANAGEMENT PLANS

Contents 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 Introduction 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 rising food prices at the supermarket, skyrocketing utility bills, and increased prices at the pumps. It s understandable that in recent years people have struggled to keep up with debt repayments, but at Baines & Ernst we re here to help you get back in control of your finances and work towards a future free from debt. 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 January 2014, personal debt in the UK stood at a staggering 1,439 trillion, with the average household debt (excluding mortgages) at 6,087.* 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: The Money Charity 2014. Baines & Ernst Debt Management Plan Guide Page 1

What is a Debt Management Plan? If your nancial 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 a ordable monthly payment that s based on what you can a ord now not the monthly amount that was originally agreed with your lenders. 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. A ordable repayments Once your a ordable 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 exibility of a Plan means that you can increase repayments if your nancial situation improves, which will help you to clear your debts in a shorter amount of time. Interest and charges frozen In 93% 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. Reduce contact from lenders As your debts are being managed on your behalf, lenders no longer need to contact you about what you owe. If your lenders 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 o debt, but it will help you to repay what you owe at an a ordable 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 a ord to repay. CREDIT RATING Your credit rating will be a ected in the medium to long term and you could nd it di cult to get credit in the future. If you have already missed or made late payments, then your credit rating may already be a ected. 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

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 lenders One of the most important stages of a Debt Management Plan is the negotiations with lenders, 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 lenders freeze interest and charges and will 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 lenders included in the Debt Management Plan. This means you ll have one payment to make as opposed to several repayments to several lenders 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

Do you qualify for a Debt Management Plan? To qualify for a Debt Management Plan, you must have: Two or more debts (for example: credit cards, payday loans, overdrafts, store cards) Unsecured debts over 1,000 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 CREDIT CARD 1 3,487 CREDIT CARD 2 1,016 LOAN 1,982 STORE CARD 1,018 CATALOGUE 911 TOTAL 8,414 Monthly repayment before DMP 511 WITH A DEBT MANAGEMENT PLAN New monthly payment 200 Monthly Saving 311 Payment after includes a monthly fee, visit www.bainesandernst.co.uk to view fee. An example projected case: assumes circumstances stay the same and the Plan is adhered to and 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

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, lenders 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 lenders 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 lenders 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: Two or more debts (for example: credit cards, payday loans, overdrafts, store cards) Debts of 5,400 or more Problems meeting repayments Proof of income Baines & Ernst Debt Management Plan Guide Page 5

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 lenders 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

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 lenders 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 Order service 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

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 4 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 48 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 lenders Have a low disposable income after paying household bills and other living essentials Live in Scotland Baines & Ernst Debt Management Plan Guide Page 8

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. Can I take out a Plan if I am a homeowner or tenant? It makes no di erence 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. What if my lenders continue to pursue me for payments? Although we cannot guarantee that lenders will stop contacting you completely, we will do all we can to reduce this contact as much as possible. While we are setting up your Debt Management Plan, we ll let your lenders know that we are working on your behalf. This means your lenders will start communicating with us directly. However, if lenders continue to contact you, please do not ignore their letters or calls, please ask them to contact us instead and we will handle their questions. Will my credit rating be a ected if I get a Debt Management Plan? A Debt Management Plan allows you to repay your debts at a lower rate than what you originally agreed with your lenders. Because of this, your lenders are legally obliged to advise you that you haven t made the monthly contractual amount and will send a document to you known as a Default Notice. A Default Notice is a formal noti cation from you r lenders that says you are in arrears. Once a Default Notice has been issued, your credit rating will be a ected for 6 years. However if you already have a history of missed or late payments, then your credit rating may already be a ected. Do lenders always accept reduced payment o ers? We will contact your lenders, explain your situation to them and propose a new repayment plan that is based on what you can realistically afford. We will also request that your lenders freeze interest and charges on your debts, so your debts can only reduce. In 93% of the debts we manage we are successful in this. In our experience, lenders will be happy to see that you are making efforts to repay your debts and are more likely to accept a reduced offer of payment as it ensures regular and consistent repayments towards your debts. Is this a loan? No, a Debt Management Plan is not a loan. We neither lend you money, nor pay o your debts. Your payment plan is a solution that allows you to repay your lenders at a monthly rate you can a ord. If you do not make payments into the Plan, we cannot make payments to your lenders. FOR A NO-OBLIGATION FINANCIAL REVIEW, SPEAK TO OUR FRIENDLY EXPERTS IN CONFIDENCE TODAY Baines & Ernst Debt Management Plan Guide Page 9

Frequently asked questions (continued) Will I be credit checked before acceptance? No. Since we do not lend you any money, we do not need to credit check you. 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 a set up fee of 240, but to make this affordable for you, we will spread the cost over 6 to 24 months depending on your individual circumstances. Your set up fee covers the following: Drafting a bespoke payment plan Creation of a Debt Management Plan pack Communication with your lenders, either in writing or by telephone Negotiations with lenders Calculation and issue of reduced payment proposals Preparation of the financial statement Setting up regular payments to your lenders Allocation of Personal Account Manager Your monthly service fee is equivalent to 20% of your monthly disposable income, subject to a monthly minimum of 40 and a monthly maximum of 100. The service fee covers the on-going work we do to ensure the plan runs smoothly and you are provided with all the support you need. Specific costs will be notified to you in advance. Rest assured all your other household expenses will be accounted for before your Debt Management Plan repayment is calculated. Over the lifetime of your Debt Management Plan we will: Review and act on lender correspondence we receive on your behalf Update your Debt Management Plan to deal with any debts that have been transferred to debt collection companies and negotiate with them Continue to distribute the agreed payments to your lenders Prepare and send to you your regular payment advice Update your Debt Management Plan to take account of any change in your circumstances and renegotiate your payments to lenders if necessary Safeguard your money in a protected client account whilst we hold it Provide an online statement and payment facility 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 www.bainesandernst.co.uk/terms-conditions/ Baines & Ernst Debt Management Plan Guide Page 10

How we could help you We have helped over 170,000 people escape the pressure of debt we could help you too! Photographs of models have been used to protect client con dentiality. At Baines & Ernst our ethos is simple to help people nd an a ordable way to clear their debts. Every day we o er advice to people with various levels of debt who are struggling to repay lenders. So whether you want to consolidate debt repayments into an a ordable monthly amount or need more information on writing o debt with a legally binding solution, we can help. Baines & Ernst is Authorised and Regulated by the Financial Conduct Authority (FCA). Baines & Ernst is part of the Paymex Group winners of Best Debt Solutions Provider 2014 at the Financial Reporter Awards and winners of 'Debt Management Provider of the Year, 2010', 2011, 2012 & 2013 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 lenders on your behalf Request the freezing of interest and charges Distribute payments to your lenders every month Provide clear debt advice every step of the way Provide online access to statements 24 hours a day 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 www.bainesandernst.co.uk and well get back to you. Call FREE 0800 096 1331 Cheaper from mobile 0161 656 7701 text DEBT to 87070 for a callback Baines & Ernst Debt Management Plan Guide Page 11