At a time like this, many people are finding it hard to keep on top of their finances. Some borrowers are missing multiple payments and according to the National Landlords Association, at the end of 2008, 71% of landlords expected rent arrears to increase during 2009. This could be due a number of reasons. For example, borrowers may be finding that payments to their non-priority debs are taking up too much of their income. Or their income may have dropped - and because the cost of living has gone up so much, people could end up in arrears.

Debt management & priority debts

There are two possible ways in which debt management could help people meet their rent payments:

1. It can ‘free up’ the money they need for priority debts. Non-priority lenders will understand that the borrower needs somewhere to live and money to live on. It is only their disposable income (total income minus essential expenditure) that will be used for non-priority debts. If the borrower can’t afford to repay the full amount of the contractual payment, many non-priority lenders may accept a pro rata payment (pro rata means that the money will be typically distributed amongst lenders according to how much the borrower owes each of them).

2. The debt management organisation might be able to speak to the landlord on the tenant’s behalf and arrange an alternative way to pay off the arrears. They might reach an agreement, but if they can’t, then the debt management organisation may be able to help their client prepare for court action (if necessary). They could show the court that they’re trying their best to keep up with their debts and clear their arrears as soon as realistically possible.

Debt management & non-priority debts

A debt management plan works by negotiating with your unsecured creditors about how you will repay your debts in an affordable manner. A borrower may ask a debt management professional to negotiate with their unsecured lenders on their behalf - requesting to lower the monthly payments, freeze (or lower) interest, and/or waive charges.

Many unsecured lenders will understand that if the borrower’s financial circumstances have changed, they may no longer be able to repay their debt at the rate originally agreed. In this case, they may accept the new changes.

However, landlords might not be as willing to negotiate in quite the same way. This is where a debt plan can also help.