Getting help to manage debt

Helene Mueller
eCollect support team

Help with debt refers to the professional advice & counsel methods, provided by expert debt help agencies. When a borrower falls behind with his regular payments, he can receive qualified help regarding his default situation by using different default elimination techniques or by consulting with organisations, which offer objective and sometimes free debt counsel. Some institutions will not charge a consumer for debt repayment services (i.e. non-government charity organisations), but some will request payment in return of providing default elimination assistance (i.e. private firms). However, both types of advice default companies will help a debtor to manage and control his debt problem. The aim of such institutions is to help and guide the borrower through his financial difficulties and bad debt situation, until he settles and clears all his obligations and becomes debt-free. Furthermore, they will advise him on how to properly calculate and manage his monthly budget in order to avoid future financial problems and monetary difficulties.

Help with debt & debt counselling agencies

If a debtor is not confident in dealing with his debt situation on his own, or he is not sure about his rights as a consumer and as an individual, and needs legal help with debt or debt counsel, he can resort to professional debt help companies. These institutions must be licensed and registered, in order to be legally authorised to perform debt help and debt negotiation processes. As the debtor will share personal details with the agency, which represent confidential information (including bank details, credit profile, etc.), it is important that the consumer is sure of company’s legitimacy.

As the most common debt is the credit card loan, the help institution provides mostly advice services for credit card debts. Even if the debt has different provenance, the first step towards getting out of debt will be a thorough finance counselling. The agency will carry out an exhaustive research of debtor’s financial condition and work out an individual budget plan,based on consumer’s monthly monetary epitome. The help agency will teach the debtor how to list his monthly incomes and how to control his finances.

The advice institution will offer the consumer various repayment and debt reduction plans. They all include personal negotiation with the creditor, where the debt help organisation will try to arrange the signature of a new debt contract with terms, which will be new and more convenient for the debtor. Help with debt agencies can organise different alleviation terms for the consumer, including reduction of the total debt amount in return of one single payment (debt settlement); decrease of the monthly sums to be paid, with or without interest reduction or freeze (debt consolidation, debt management schemes, voluntary arrangements, etc.). If the consumer cannot keep up with the monthly payments due to severe monetary problems, help with debt agencies can suggest filing for a relief order (a DRO- Debt Relief Order, for UK & Wales).

For United Kingdom and Wales are applicable the so-called Individual Voluntary Arrangements and Company Voluntary Arrangements. They are similar to the debt management but differ from it as well, as the IVAs and CVAs are official and legally bound arrangements, which have a statute limitation of 5 years. After this period any outstanding amounts will be written off. A borrower, however, cannot be elected for such arrangement, if he does not have the financial funds to cover the debt sum requirements. The monthly payments are complied with debtor’s income and expenses.

Debt counsel agencies in Scotland also offer the so-called Trust Deed. Typically, this scheme is unofficial and not legally binding, but can also be secured and in this case is known as Protected Trust Deed (PTD). As most debt help schemes, this one also has exceptions for debts, which are not included and do not apply for the PTD: all types of secured debts, various court fines, child support taxes, rent unpaid debts, house mortgages, and other loans.

Debt help & debt restructuring

All types of help with debt procedures fall under the common definition of debt restructuring, as they all lead to reorganisation and change of debt terms and contract. This method helps a borrower to overwhelm a bad debt situation by negotiations with creditors or reorganisation of defaults (debt reduction). This scheme is applicable for both private individuals and public corporations (consumer & business loans). In Switzerland, Italy, United Kingdom and other countries this scheme can be carried out either by an unofficial agreement or by court-mediated arrangement contract. Should the arrangement turns not to be convenient for one of the two parties (consumer or creditor) by means of negotiating an unofficial agreement, court or court representative can arbitrate the dispute, using legal means and resolutions.

Used literature & External links