Partner Article

Debt plan warning

A NORTH East insolvency expert has warned people who take on Debt Management Plans are in danger of becoming ‘slaves to their debt’.

New research from insolvency trade body R3 has found that more than a quarter of DMPs are set to last for ten years or more, despite being hailed as a quick fix solution to financial problems.

R3’s survey of almost 2000 people found that more than a fifth (22%) of individuals in a DMP say that they were not asked for proof of their income or expenditure before their plan began.

Linda Farish, chairman of the North East arm of R3 and director of Recovery and Insolvency at Newcastle-based accountants RMT, said: “It is incredible that organisations set up DMPs without vital income and expenditure details.

“DMPs can play an important role in offering a manageable solution to individuals who are able to pay back their debts.

“However, DMPs should only be considered after review of all options available to individuals, and the sheer length of some plans indicates that the amount of debt these people have is too large for a DMP.”

The new figures show that almost a third of individuals who are currently bankrupt or in an Individual Voluntary Agreement (IVA) used to be in a DMP.

Ms.Farish added: “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.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .