Rising personal debt levels in the UK have resulted in many consumers seeking advice and debt management assistance from one of the number of debt advice companies and charities around, and many have entered into debt management plans through these firms. However, in the past they have experienced difficulties in terms of making arrangements with creditors, who are often unhappy about freezing interest, accepting lower repayments, or writing off a portion of the borrower’s debt.

However, all of this could change as a result of debt advice and debt management companies and debt charities being given new powers that could allow them to take more control no matter what the lenders think. Under the new powers, which are in the Tribunals, Courts and Enforcement Act passed last year, these debt companies and charities will be able to write off a portion of the client’s debt themselves no matter that the lender thinks of the situation.

In other changes that come as part of the act, utility companies that are owed money will not be able to cut off the supply of consumers that are clients of these debt companies. Likewise lenders will not be able to petition for bankruptcy if the consumer is a client with the debt company or charity. The debt firms will also be able to enforce a repayment schedule with the lenders, even if the lender is not happy about the schedule.

There are currently around 70,000 in debt management plans with these debt advice firms and charities, and with household finances becoming increasingly strained this figure could rise. In the past some consumers have found that lenders have refused to accept certain offers even if they have been put forward by their case officer at the debt firm. However, the lender may soon no longer have a choice.

One official from the Justice Ministry stated: ‘Such schemes depend on the voluntary participation of the debtor and creditors and operate without any form of regulation. There is currently no power to compel creditors to adhere to the terms of a debt repayment plan.’

Once the plans have been reviewed the Justice Secretary, Jack Straw, will provide licensing to approved debt agencies and charities so that they can utilise these powers when setting up debt management plans for their clients.

This is just one of the measures that the government is bringing in to try and help consumers with high levels of debt. Later this year a more simplified version of the IVA (Individual Voluntary Arrangement) is due to be brought in, and this could help more people to find a suitable solution to deal with their debts. In April of next year and simplified form of bankruptcy filing known as a Debt Relief Order is to be brought in, and this can help those with under £15,000 of unsecured debt.

Recent additions:

• Darling wants banks to help vulnerable families
• Debt relief orders could make bankruptcy too easy
• Is debt consolidation the answer?
• CAB reports rise in enquiries relating to mortgage arrears and debt
• Options That Can Help Clear Your Debts
• Wipe Out Debt Problems With A Low Rate Loan

One Comment

1. Debt worries result in many consolidations | Glitec May 23rd, 2008 7:59 am :

   [...] Debt advice companies and charities get new powers [...]

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