Note: I don't know jack shit. This is what I've worked out from one day at work. It might not be right. Your Mileage May Vary. #include(disclaimer)

How do Debt Management companies work?

Firstly, you're in debt, usually to more than one creditor. Essentially, what a Debt Management company does is it calculates your earnings and your expenditure, and works out how much you have left over. This is then spread between all of your creditors, depending on how much you owe them, and the Debt Management company, that takes a sizable chunk.

Ok, lets look at some maths, in a totally hypothetical situation.

Let's assume that Mr. and Mrs. Baggins have gotten behind in their repayments, because Mr. Baggins has just got sacked for sexually harrassing an elf. Firstly, you add up all their wages, and any benefits they've been getting. Lets say this adds up to £1000 a month. Then you add up all of your expenditure. Now, this is quite difficult, so you might want to get some help at this stage... remembering everything, and not adding too much, nor too little. I'd suggest a Citizens Advice Bureau as a first call. TV license, food, clothes, heating, the car, the rent, the contract mobile phone (pay-as-you-go goes straight in the bin...).. it all adds up. And you'll need proof for most of that. Let's say there's £200 pound a month left.

Now Bilbo's been pretty naughty, and has run up a £30,000 pound debt. Divide £30,000 by £200 and you see that he's going to pay £1 a month for every £150 pounds he owes. He's in deep. So he owes GGGT (Gremlins, Ghouls, Goblins and Trolls) £8,000. That means he'll pay then £53 pounds a month (£8000/£150).

Now there's a lot of work there, but to finally get the creditors of your back.. is it worth it? Remember... if they charge £30 a month, he'd be paying GGGT £9 a month less. People have had broken necks for less...

See someone who knows about this stuff... try a Citizen's Advice Bureau.