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Mr Smith has 6 unsecured creditors with a total debt of £38,786, his current contractual monthly payment amounts to £1,163.58. After taking his income minus his essential expenditure into account, Mr Smith has £434 to service these debts. A Debt Management Plan was negotiated for Mr Smith who will pay £434 per month. This single monthly payment will be distributed to creditors on a pro-rata basis. This reduces Mr Smith’s outgoings to his creditors by £729 per month.
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If your loan or credit card agreement is valid, and if you are in arrears with any unsecured creditor, i.e. a loan or credit card, we can approach your creditors to seek their acceptance in order you may pay a lump sum which is much less than the full balance you owe on the debt. In return for having a lump sum payment the creditor agrees to write off the rest of the debt.
You may be able to do this because you have come in to some money, or have some savings you can use. Sometimes a friend or relative offers to put forward a lump sum to help you pay off the creditors.
This method of settling your debt(s) would result in a minimum degree of negative impact on your credit file, when compared to bankruptcy and IVA’s, and will cease any recovery action that has been taken against you, including debt collectors, telephone calls and court action.
The level of the reduced settlement is dependant on the creditor, the type of debt and your individual circumstances. By accepting a reduced lump sum payment, the creditor agrees to write off any outstanding debt.


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