If a household has decided they want to pay back their debt but aren’t in a position to go down the route of a formal solution such as an IVA or bankruptcy. Sensible debtors negotiate directly with creditors or seek the advice of one of the free debt charities such as www.cccs.co.uk or www.payplan.com. They will arrange a debt management plan which is an informal arrangement between debtor and creditor. Once a budget has been set the debtor will use any surplus to pay back the debt over a period of time. The issue with Debt Management Plan’s or DMP is that they are an informal arrangement and there is no requirement for banks to reduce or stop interest which can sometime mean the debt continues to grow. Forums on www.moneysavingexpert.com bear testimony to the difficulities debtors have with banks even when they are not hiding from their debt and want to pay it off.
Banks should be required to freeze interest on all debt were a debtor has entered a DMP with a recognised third-party free debt advice organisation. At present debtors rely on the goodwill of the banks to freeze interest and this is very often not forthcoming. We as tax payers have bailed out the banks – the EU is coming together to bail out Greece – our banks should treat with fairness customers who have stopped using credit and want to pay back every penny of their debt.