If you're planning on using a debt management company, careful research is key, says John Hearne
The standard piece of advice when you find yourself with debt problems is don't ignore them. Don't hide letters, don't pretend the final demands never came. But the trauma of being in debt is such that good advice is hard to take.
Entrepreneur John McGuire, in his book Sorted -- How to Survive and Thrive when Money is Tight, says the most important thing to do when mired in debt is to talk about it. When he owed millions and his business was going down the tubes, he describes the pressure as a clamp on his brain: "Once I spoke about it and it was out there, I felt sudden relief. I didn't want to discuss it up until then because I felt I would be worrying people around me. That was stupid, because they were already worrying," he explained.
The good news is that help is available, and available from a variety of sources.
At this stage, everybody knows about MABS, the Money Advice and Budgeting Service. It can be found online at mabs.ie. You'll find ample resources there to empower you in the struggle ahead. MABS also operates a helpline on 0761 072000, which is open from nine in the morning until eight at night.
Advice can only carry you so far. When you're despairing over debt, you often don't have the courage to open the post, let alone sit down and work out a budget.
Creditors can be aggressive, unco-operative and threatening at the best of times. That's doubly true at the moment, when businesses are going under every day because they can't collect what's rightfully theirs.
MABS also offers face-to-face consultancy, though currently there is a waiting list for this service.
Michael Culloty of MABS says this: "Since the downturn in the economy, our waiting lists have gotten somewhat longer. However, I would say that if people have an emergency, if they're facing an eviction or a disconnection, then they jump to the top of the queue."
The second source of help comes from privately run debt management companies. Be warned, however. These companies are not regulated. You or I could set one up tomorrow and start taking in people's money the day after.
Earlier this year, the Central Bank wrote to hundreds of customers of debt management company Dunne and Maxwell, trading as yourmoney.ie. Note how close the designation is to the National Consumer Agency's site itsyourmoney.ie. The bank warned customers against making payments to the company and within 24 hours it had disappeared.
However, there is a well-functioning, well-regulated debt-management sector in the UK, and there are legitimate, well-run companies based here too, which are crying out for regulation.
Of the three debt-management companies contacted for this article, only one would disclose its pricing structure. Eugene McDarby, CEO of Money Village, says if a client has three debts, they charge €35 a month, if there are four to five debts, the charge is €40 and above six debts, it's €50 per month. These charges, he says, are deducted from creditor payments.
"We do a paper analysis before going to meet people in their homes," says Mr McDarby.
"We conduct a very detailed financial analysis of their circumstances and calculate what they can afford to pay based on income and expenditure.
"When we walk out that door, we have come up with a plan that will make sure they can survive every month, based on the new payments that they make to the creditors.
"Debt management is very much about taking the stress and the pressure out of the home."
Both MABS and the National Consumer Agency are extremely wary of the private debt-management sector.
"People in debt are like a rabbit in headlights," says Mr Culloty at MABS. "They don't know where to turn or what to do. They want to get somebody to lift the load and very often they just go to the first port of call that presents itself.
"There is no best practice and no regulation, so therefore consumers are going into a vulnerable space. We would hope that, down the line, the sector will be regulated."