New government regulations that have been introduced could result in debt agencies and charities in the UK being able to write off a portion of clients’ debts even in the event that creditors are not happy about the matter. Many people that are struggling with their debts now turn to debt management agencies and charities, and are often put onto a debt management plan, where they pay a set amount each month to the agency, and this is then distributed amongst the creditors on a pro rata basis.

The new regulations will provide these debt management agencies and charities with a number of new rights. They will be able to write off a portion of the client’s debt themselves in some cases, despite any objections from the creditors. In addition to this the agencies and charities will be able to enforce a repayment structure for the remainder of the debt, even if the creditors are not happy with it. At present there are often difficulties encountered when creditors disagree with repayment schedules.

There are also some other changes that have resulted from the new regulations. Where the client owes money to a utility company the company will not be able to cut off their supply whilst the client is part of the debt management plan. Also, creditors will not be able to force the client to file for bankruptcy if they are in a debt management plan and are making repayments via the plan.

An 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.’ He also said: ‘There is currently no power to compel creditors to adhere to the terms of a debt repayment plan.’

It also said that debt companies and charities would be able ‘to write off a proportion of the debts where a debtor complies with a plan, but cannot repay the full amount in reasonable time.’

Recent news:

• Debt worries result in many consolidations
• Debt advice companies and charities get new powers
• 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

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