debt management companies

kinclaven2010

one of my work colleagues signed up to a debt management company who he pays money to every month.
he wants to stop this and work out paying off the debts seperately with the individual companies.
what are risks/ problems if he does this?

Tixy

Hi

Is this a company that charges a monthly fee that they take from his monthly repayment? If so its a great idea to cancel - usually they require 4weeks written notice to do so (he'll need to check his original document).

What is his reason for wanting to change? is it just to avoid the fee? or is it because he wants to pay his creditors in different proportions or a lower amount?

If its about avoiding the fee then he could certainly consider a self-managed DMP where he makes the same payments direct (well slightly more to account for no longer paying the fee) - he should have no major problems with this, but will find he gets more paperwork from his creditors and perhaps a bit more hassle from them (though there are template letters to send if they do). The alternative would be to consider using a charity to run his DMP, same service but no fee - see here - IMPORTANT - Where to seek professional impartial advice about your debts.

If its because he wants to pay in different proportions then he could have issues with his creditors if he is not treating them all equally. Eg the ones getting the worse deal could start charging interest again (assuming they have stopped). And if he wants to pay less overall then he would need to be able to justify why and what has changed in his circumstances to mean he cannot afford what was agreed before.