Debt management: making room for rising bills

29 August 2008

What do you do when your income doesn’t stretch as far as you’d hoped? Following the recent record price increase from British Gas, Adam Scorer (Campaigns Director at gas and electricity watchdog energywatch) commented that:

“…almost a billion pounds of profit in six months isn’t the sort of profit [British Gas’ parent company] Centrica wanted so it has raised gas prices by 35%.”

British Gas stated that ‘soaring wholesale energy prices have forced it to increase tariffs for domestic gas and electricity’ – but as Mr. Scorer points out:

“Consumers would love to be able to affect their bottom line so easily.”

Unfortunately, very few people have the option of charging their employer 35% more because their own bills have gone up. It seems making the same money stretch further is the only option. Or is it?

Debt management – making the money go further
When living expenses go up and borrowers simply don’t have the money to keep up with their debt repayments, debt management can help them bring their expenditure back in line with their income.

Basically, debt management is one solution to a problem that’s confronting more and more people who owe money: now that their monthly expenses (food, fuel, mortgage / rent, tax, etc.) have gone up so much more than expected, they’ve found they can’t make their debt payments.

They may be able to cut back on (e.g.) their energy usage or food bills to some extent, but that’s not always enough. If they’ve made all the economies they can think of and still can’t manage their debt repayments, there’s a chance their creditors will give them some leeway if they ask – or if they get a debt management organisation to ask on their behalf.

Debt management professionals
A professional debt management plan works like this: the debt management organisation contacts the creditors, explaining that the borrower’s circumstances have changed and that they’re unable to repay the debt in the way they’d originally agreed. They ask them to agree to accept lower payments, freeze interest and/or waive charges.

The creditors don’t have to agree, but a debt management professional is good at explaining why it’s necessary – they’ll explain how much the individual earns, and how much they need to live on every month. If the creditor can see that this is the best realistic, affordable way of getting their money back, they may well agree, especially if they’re dealing with a long-established debt management company they’ve already dealt with many times in the past.

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