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What is Debt Management

Debt Management is a new concept for most New Zealanders.

The debt management concept which has taken off in the UK and United states, and introduced into New Zealand By KiwiDebt Limited, which seems to be the first of this kind of debt management company .

The preparation of a budget for an individual is helpful in getting a picture of the level of affordability to service Debt, but this only goes so far. There is no commitment to payments, there is no risk of failure. There is also no-one to keep a debtor on track for their monthly payments.

Debt management, by the standard financial definition, involves a designated third party assisting a debtor with repayment of his or her debt. Many companies specializing in credit counseling offer debt management plans to help people with heavy debt and damaged credit get their financial situation under control.

A simpler definition of debt management could be the routine practice of spending less than one earns. However, for all intents and purposes, debt management is a structured repayment plan set up by a designated third party, either as a result of a court order or as a result of personal initiation.

A debt management plan entails a series of steps, which the third party service works on with the help of the debtor. The first step typically involves compiling a list of all creditors and the amounts owed to each. Some creditors are not eligible to be included in a debt management plan, and typically, secured debt such as car loans and home loans are usually not included.

Once a list of creditors is compiled and the amount of debt is totaled, the debtor s total income and expenditures, such as mortgage or rent payments, car payments, cost of living expenses, and so forth, are totaled as well. The third party agency assisting with the debt management plan then helps the debtor to determine the maximum amount of money available to allocate to the plan for debt repayment. In many cases, a third party service will attempt to settle some debt amounts and exclude or lower any interest charged during the repayment period.

Professional Debt Management

Companies like KiwiDebt Limited and Debt Doctornegotiate with creditors, and endeavour to remove the stressful situation of working with the creditors pool to satisfy the mutual demands of the debtor and the creditor.

For Creditors, to work with Debt Management Companies, it has a two-fold advantage.
-> Firstly, a debt management company will not charge the Creditor to collect the debt
-> Secondly, to refer a client to a debt collection company (before a Debt Collection company promotes an attitude of willingness to assist a client.

All recovery action, whether it be budgeting services, Debt Management or insolvency has a cost attributed to it, nothing in this life is free.
Although there may be free services, they need to be funded by either donations, contributions, or Government.
Click [here] to see a table of costs and comparisons

When a client does not want to embark on a Debt Management Plan, this leaves the Creditor with a limited number of choices to collect the funds that are due to them.