Ethical Debt

Management
Debt Management
- involves various steps that
aim at the repayment of debt
over the shortest period
possible. individuals can deal
with debt with the help of a
third party or on their own
What Is a Debt Management
Plan?
*A debt management plan is a
type of repayment plan that's set
up and managed by a credit
counseling agency.
*strategy that helps a debtor to 
repay or otherwise handle their 
debt better.
Debt Management Process
• first step one needs to take is to compile a list of
all creditors, including the monthly interest charge
• think of all sources of income and his total
expenses per month (e.g. utility bills, rent,
groceries, etc.)
•  financial coach will examine it and propose a plan
through which one's income will suffice to cover
the monthly expenses, optimizing debt payments
Advantage of debt management plan

• making one regular monthly payment allows you

better control over your finances
• your creditors may agree to freeze interest and
charges on your debt and may stop other action
like taking you to court (although they don’t
have to)
• peace of mind – in many cases, you will no
longer be contacted by your creditors or debt
collectors
• if you finish the plan, your unsecured debts will
Who can use debt management?
• are facing a short term cash flow problem and
believe that their financial position will change in
the near future
• are not able or do not want to take out any
additional loans or use their equity in their home
• want to do away with the pressure from creditors
• want to pay off all their debts but are struggling
with their present repayment schedule
Disadvantage of management plan
• your debts must be repaid in full – they will
not be written off
• creditors don’t have to enter into a debt
management plan and may still contact
you asking for immediate repayment
• mortgages and other ‘secured’ debts are
not covered by a debt management plan
Which debts can I pay off with a Debt
Management Plan?

• overdrafts
• personal loans
• bank or building society loans
• money borrowed from friends or family
• credit card, store card debts or payday
loans
• catalogue, home credit or in-store credit
debts.
Which debts can’t I pay off with a Debt Management Plan?

• TV License
• Council Tax
• gas and electricity bills
• child support and maintenance
• Income Tax, National Insurance and VAT
• mortgage, rent and any loans secured against your
home
Considering a Debt Management
Plan
• Before you sign up for a debt management
plan, choose a credit counseling agency to
help you with the process. Many of these
organizations are nonprofit and may
offer credit counseling free of charge, while
others charge fees
Debt Management Ratio
• Debt ratios measure the firm’s ability to repay long-
term debt. It is a financial ratio that indicates the
percentage of a company’s assets that are provided via
debt. It is the ratio of total debt (the sum of current
liabilities and long-term liabilities) and total assets (the
sum of current assets, fixed assets, and other assets
such as ‘goodwill’)
• Debt ratio = Total debt / Total assets
Or alternatively:
• Debt ratio = Total liability / Total assets
Effective Debt Management Strategies

• Pay Your Bills on Time Each Month

• Make at Least the Minimum Payment
• Decide Which Debts to Pay off First
• Use a Monthly Budget to Plan Your
Expenses
•  Track your spending