Up to 600,000 people who are struggling with their debts are being missed off official insolvency figures.
R3, which represents insolvency professionals, says around 600,000 people have taken out debt management plans because their debts had become unmanageable.
A debt management plan (DMP) is a non-legally binding agreement between a borrower and their creditors, under which the borrower agrees to repay an affordable amount each month.
Unlike bankruptcy and individual voluntary arrangements (IVAs), these debt management plans are not included in the Insolvency Service’s official statistics. Which? has more information on dealing with debt.
Which? debt advice
Consumers struggling with debts should seek independent, free debt advice from organisations such as the Consumer Credit Counselling Service (0800 138 1111), National Debtline (0808 808 4000) or their local Citizens Advice Bureau (number in the phone book).
While debt management plans can be a good solution for some, interest charges are often not frozen, plans can last for years and they are not legally binding on either the borrower or the lender.
Consumers should avoid commercial debt management companies – why pay for a service that is available better and free elsewhere?