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02/03/2010

Ten years of debt slavery for those in Debt Management Plans

Figures released today by insolvency trade body, R3, show that a quarter (26%) of Debt Management Plans (DMPs) will last ten years or more, even though a DMP is meant to be a short-term repayment plan between an individual and their unsecured creditors.

R3 President, Peter Sargent commented: “DMPs can play an important role in offering a manageable solution to individuals who are able to pay back their debts. However, the sheer length of some plans indicates that the amount of debt these individuals have is too large for a DMP. By entering into these inappropriately lengthy plans people become slaves to their debts.”

“Moreover, our figures show that a third (30%) of individuals who are currently bankrupt used to be in a DMP. 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.”

R3’s survey also reveals that twenty-two per cent of individuals in a DMP say that they were not asked for proof of their income or expenditure before their plan began.

“It is incredible that organisations set up DMPs without these vital details,” added Peter Sargent. “If this information is not verified at the start the monthly payments may be set too high – dooming the plan from the outset.”

R3’s research also finds:

  • 46 per cent of IPs have seen DMPs fail because the monthly repayments were too high.
  • 52 per cent of IPs have seen individuals being ‘pushed’ into DMPs by creditors.
  • And 35 percent of individuals in a DMP say that other options for dealing with their debts, such as bankruptcy were not discussed before starting a DMP.

Notes to editors:

Methodology note - research agency ComRes surveyed 1,961 members of the public who describe themselves as struggling with debt by online questionnaire between 17 December 2009 and 7 January 2010. The sample is split into five sections: 1,193 individuals are struggling with their debts, but haven’t contacted anyone for help; 308 are struggling with their debts and have contacted their creditors; 260 are in a Debt Management Plan; 119 are in a Individual Voluntary Arrangement; 66 are bankrupt; and 15 are in a Debt Relief Order.   ComRes is a member of the British Polling Council and abides by its rules.


R3 Press Office

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see www.r3.org.uk for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
     
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.