Can Retired People Start a Debt Management Plan?

- by Sarah Connelly
The 2023 Guide to Debt Management Companies – Chapter 16

Are you retired but still in debt? Don’t give up! Cashfloat are here to help! In this article you can explore debt management plans for the retired and how they work.

Chapter 16, Retired People and Debt Management Plans- Cashfloat Chapter 16, Retired People and Debt Management Plans- Cashfloat

At Cashfloat it doesn’t matter who you are – we’d like to help. Whether you’re a student, a full time employee or a retiree, our blog topics cover a huge range of issues that you might need help with.

In this article, from our guide to debt management plans, we will talk about how retired people can use debt management plans.



How do Retired People End Up in Debt?

Debt is often blamed on recklessness and irresponsibility and young people are often thought of as being more likely to get into debt than older people. However, debt can happen for a variety of reasons and it can happen to people of all ages. Often, debt happens when people have borrowed responsibly, but have then encountered an unexpected event which has made them suffer financially. Life events, such as the breakdown of a marriage or relationship, the sudden onset of an illness or even the death of a partner can all cause financial problems which can lead to debt.

Nowadays, more and more people are retiring with debt. Often, this happens to people who borrowed responsibly with the intention of paying off their debts before they retired, but were unable to do so due to unforeseen circumstances. This leaves them entering retirement with outstanding debts.

In 2020, one in three retirees still had outstanding debt- Cashfloat In 2020, one in three retirees still had outstanding debt- Cashfloat

Whatever the cause of a person’s debt it can cause them serious problems and a large amount of stress. For retired people, this comes at a time when they were hoping to be able to relax more and, also, when they often have less money available. However, as for all people who end up in debt, help is available for retired people if they end up in debt and no debt problem is unsolvable. Debt management plans (DMPs) are one solution to debt, which retired people may be able to make use of.

How Common Is Debt in Retirement?

If you have debt in your retirement, it may help to know that, these days, many other people do as well. In 2017, the Guardian found that one in four people who retired that year were doing so with outstanding debts. The average amount of debt for these people was £24,000. In 2020 this increased to one in three retirees being in debt. There are many reasons why more people are retiring with outstanding debts than they previously used to. Among the causes of debt for retired people, it should be noted that the financial crisis of 2008 affected many people close to retirement age. As a result of the financial difficulties people faced during the financial crisis, many people are retiring nowadays in debt.

Is There an Age Limit for Debt Management Plans?

There is no upper age limit for starting a debt management plan. Under a debt management plan, creditors are offered reduced monthly payments (usually below minimum payments) which the person who is in debt will pay until their debt is cleared. If creditors agree to the plan then the person will be able to clear their debts at a reduced rate. Anyone who is able to reach an agreement with their creditors, as part of a debt management plan, and can stick to making monthly payments until their debts are cleared will be able to start a debt management plan. The same applies to retired people. However, it should be noted that, while retired people are able to start a debt management plan, some may struggle to meet repayment conditions.

It's never too late to tackle your debt, debt management plans- Cashfloat It's never too late to tackle your debt, debt management plans- Cashfloat

What Should Retired People Do to Clear Debt?

Anyone who ends up in debt is likely to be quite seriously affected. Debt causes a lot of stress and can seriously limit a person’s freedom and financial options. While this is the case, it should be pointed out that no debt problem is unsolvable. While it may seem difficult to see a way out of debt, it is always possible to find one. If you have lost control of your debts, the best thing to do is to seek help and try to get some control over your situation.

Confront Your Debts and Seek Help

If your debts have reached the point where you have lost control of them and cannot pay them off by budgeting yourself and making your normal payments, then you should seek help to deal with them. Often, the hardest part is making the decision to do so. Many people feel at a loss and are unable to confront the problem. However, the quicker you do so, the better. Luckily, nowadays, for people who find themselves struggling with debt, there are many free charitable organisations who can provide advice on how to deal with debt and also lead people the whole way through their recovery from it.

Charities such as StepChange, Christians Against Poverty, National Debtline and the Debt Advice Foundation can all offer advice and support to people who are dealing with debt. One way many of these charities can help is by arranging debt management plans. Arranging a debt management plan can be a complicated process and having the help of an impartial, professional organisation can be a great help.

Avoid Debt Management Companies

As we have mentioned throughout this guide to debt management plans, people who are seeking help with their debts should avoid debt management companies. Debt management companies offer a range of debt services, including arranging debt management plans. However, these companies exist to make a profit and many charge large fees to their clients. These fees come at a time when people who are seeking their help can least afford them. On top of this, the services that they offer are available for free from debt charities.

What are Debt Solutions?

Debt solutions are ways to solve a debt problem. Where someone is unable to budget themselves independently, make their normal payments towards their debts and to pay them off independently, they will seek a debt solution. A debt solution will allow them to make some kind of arrangement, which will either allow them to pay off their debts in a manageable way, to reduce the amount they owe or even clear their debts without paying them. Debt management plans are one kind of debt solution.

While debt management plans are a common solution to a debt problem, they are not the only one. It is important before you start a debt management plan to be sure that it is the right solution to your debt problem. A discussion with an impartial debt advisor should help you to understand whether this is the case or not. It may be that an alternative solution, such as an individual voluntary arrangement (IVA) or a debt relief order is more appropriate.

Stress is unhealthy, Get professional advice on managing your debt- Cashfloat Stress is unhealthy, Get professional advice on managing your debt- Cashfloat

What is a Debt Management Plan?

A debt management plan is a non legally binding agreement that a debtor makes with their creditors. Under a DMP, the debtor (the person who owes money), usually with the help of a debt organisation or charity, will work out how much they can realistically afford to pay towards their debts and then offer a monthly amount to each of their creditors (the people they owe money to). This monthly amount will be less than the minimum amounts they should be paying. Usually, they will also ask their creditors to freeze interest and fees on the debt while the DMP is in place. This is to stop the debt from spiralling out of control or becoming too difficult to repay. If the creditor agrees to the plan, the debtor will then repay their debts at a rate that is slower than what they originally agreed to when they first borrowed money, but is affordable to them. For a more complete explanation of how a debt management plan works, go to Chapter 3 of this guide.

Setting Up a Debt Management Plan

While it is possible to arrange your own debt management plan, the vast majority of people do it through a debt charity or organisation, such as Christians Against Poverty. Debt management plans are suitable for people who have some spare money to contribute towards their debts, but not enough to stick to the repayment agreement that they made when they originally borrowed money. Under a DMP, people are able to clear their debts in an orderly fashion and to, eventually, get their financial lives back on track. While the basic idea behind them is simple, there are various things to consider before you start a debt management plan. There are also downsides to being on a debt management plan, particularly, the negative effect that it has on a person’s credit rating.

This Cashfloat guide has been dedicated to debt management plans and everything that they entail. Take a look at the contents and see if you can find the answers to any questions that you have.

How Can A Debt Management Plan Help?

Debt Management Plans – What are the Downsides?

While there are many advantages to starting a debt management plan, including the fact that they can allow a person to become debt free, there are some disadvantages.

In Summary…

If you are retired or nearing retirement age and are wondering whether a debt management plan could help you to pay off your debts, then it is always wise to consult an expert. Remember that free and professional advice is available from charities, such as Stepchange and Citizens Advice.

Debt management plans are one solution to debt, which allow people to clear their debts in a manageable way and to get their financial lives back on track. While they do have their downsides, many people have used debt management plans, including people of retirement age, and they can provide a way to escape what can seem an inescapable situation.

It is important to remember that, while debt can be very stressful and difficult, it is always possible to find a solution. For more information on how debt management plans work, read the rest of this guide.


Get your debt under control for free, contact Stepchange - Cashfloat
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About The Author
Sarah Connelly
Sarah is an enthusiastic writer, blogger and an eager agent of change. After completing her degree in Computer Science in one of London’s esteemed universities, Sarah’s early career in programming left her creatively frustrated. Looked for a way to combine her creative and analytical side, Sarah’s search led her to Digital Marketing and now she writes content and code for Cashfloat. Sarah enjoys spreading awareness about common financial issues and the importance of money management. With her STEM background, Sarah believes strongly in ethical business management and consumer protection. in her free time, Sarah enjoys reading, watching movies and eating out. After all, #YOLO!
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