KEVIN STILL.
Chief Executive Officer,
DEMSA
Finding the right debt solution should take
into account whether priority creditors can be
accommodated – and whether this requires
payment preference or alignment alongside other
unsecured credits on a pro-rata basis.
This is likely to be governed by negotiations and
the creditor themselves, who may have specific
policies. It is also the case that outside of consumer
credit regulated debts acceptance of the Common
Financial Statement can be variable. There will
be instances where a commercial debt solution
provider cannot assist further and will signpost the
consumer to a more suitable provider to take their
case forward.
Common issues we see are enforced debts with
charging orders, where an unsecured debt has
been converted into a secured debt. Some debt
buyers apply judgment interest, so these cases
need to be treated carefully. Mortgage shortfall
debt can significantly unbalance a debt solution.
Many utility debts can be included on a plan on
a pro-rata contribution basis but local authorities
vary significantly.
It is sometimes easier where debts (e.g. Child
Support Agency or its replacement) are collected
from earnings. In Scotland, a trustee can collect
overdue payments into a Trust Deed from wages.
We need to make the distinction between issues
that exist at initial advice and those that arise
during a managed debt solution. If the debt
manager is responsible for just managing the
unsecured debts then they need to monitor the
performance of the consumer in meeting their
priority obligations. It is not uncommon for this
to go wrong and for the debt manager to have
to provide support to ensure the debt solution
doesn’t fail.
All regulated firms will be required to report
attrition and the reasons for this. It is therefore
important they maintain good management
information and evidence of changes in
circumstance and act upon them.
Government agencies also vary in their policies
and it is prudent to review an informal debt
solution like a debt management plan early
to assess the outcome of negotiations and keep
the client fully informed.
“FINDING THE RIGHT DEBT
SOLUTION SHOULD TAKE
INTO ACCOUNT WHETHER
PRIORITY CREDITORS CAN
BE ACCOMMODATED.”
The views in this article are those of the contributor and do not necessarily reflect those of UKAR.
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