Debt Management Plans

A Debt Management Plan (DMP) is designed to help people who are struggling repaying their debt. A DMP is an informal arrangement whereby a licenced and authorised third party, such as ourselves, administers a repayment plan on behalf of the person in debt.

 

Example of a Debt Management Plan

Example of how a Debt Management Plan (DMP) can help with your debt problems

Unsecured loan £6,000
Credit card £3,000
Store card £2,000
Total owed £11,000
Current monthly payments £385
New monthly payment £150

Plans vary and what you can afford towards your debts is the main factor

 

Is a Debt Management Plan the right solution for me?

A debt management plan is not always suitable for everyone. For instance if you have debts greater than £12,000 you could qualify for an Individual Voluntary Arrangement (IVA). We always provide the best advice based on your personal circumstances when advising on which debt solution is most suitable for you.

 

Am I eligible for a Debt Management Plan?

If you have unsecured debts of more than £2,000 and are struggling to meet the repayments, you could qualify for our help.

 

Will interest and charges be frozen?

In most cases, yes. Creditors have no obligation to freeze interest and charges by law, therefore we cannot guarantee to freeze interest and charges on your debts for the duration of your debt management plan. However, with our experience and the relationships we have built with major creditors over the last few years, we are able to freeze interest and charges on nearly all accounts within 8-10 weeks of the debt management plan commencing.

 

What debts can be included in a DMP?

A Debt Management Plan can help to make reduced payments to unsecured creditors such as:

  • Personal unsecured loans
  • Pay day loans
  • Credit cards
  • Store cards
  • Charge cards
  • Catalogues
  • Bank overdrafts
  • Personal debts owed to businesses
  • Previous utility (Gas, Water and Electric) suppliers
  • Previous TV/mobile/telephone service providers

 

What debts cannot be included in a Debt Management Plan?

Debts that cannot be included in your DMP (Debt Management Plan) are as follows:

  • Mortgages
  • Secured loans
  • Rent and property service charges
  • Current utility (Gas, Water and Electric) debts
  • Current service provider (TV/mobile/telephone) debts
  • Hire purchase (HP) agreements
  • Student loans
  • Benefits overpayments
  • Child maintenance
  • Council tax
  • Court fines

 

What are the fees for this service?

If you are paying at least £100, 45% of the first six payments into the plan are arrangement fees. They cover the cost of setting up the debt management plan, including a draft proposal, dedicated account manager, creditor communications and preparation of the financial statement.

From Month 7, a fee of 12.5% (or a minimum of £35) is retained from each further payment to cover the cost of running the plan. Our maximum monthly fee is £125.

 

Is my home at risk?

No, we only administer debt management plans for unsecured debts with no security against assets or property, therefore your home is not at risk.

In many cases, we can help prevent threats of a charging order, and, even if a charging order has been secured, we can negotiate with your creditors to stop any further action.

 

How long will my Debt Management Plan last?

The length of your debt management plan depends on your individual situation, such as the level of debt and monthly surplus income, and how quickly the creditors freeze interest and charges. A DMP is flexible also, as the amount that you pay is dependent on how much you can afford.

 

What are the advantages of a Debt Management Plan?

1. Affordable Repayments

Your monthly repayments are reduced to affordable amounts which fit within your disposable income. This means that you no longer have to ‘Rob Peter to pay Paul’. For example, you stop using your bank overdraft and credit cards to make your debt repayments each month.

2. Single Monthly Repayment

If your payments are managed by a Debt Management Company, then you will be able to make a single affordable payment which is easier for you to manage each month. The Debt Management Company will make all the individual payments for you.

3. Flexibility

The plan is not legally binding and therefore flexible. You can stop paying into the agreement at any time if you decide an alternative solution is better for you.

4. Discreet Procedure

A Debt Management Plan is not included in the insolvency register. It is a private agreement and therefore can be used by professionals, forces personnel and company directors without damaging career prospects.

 

Are there any disadvantages to Debt Management Plans?

Although the advantages of a Debt Management Plan are significant, undertaking one is a serious matter. As such, there are some things that you must bear in mind when thinking about a DMP:

1. No debt written off

You will have to repay 100% of your debt. Creditors will not normally agree to write off any debt.

2. No Guarantee that Interest will be frozen

Creditors are not under any legal obligation to suspend interest or late payment charges. This means that you may pay off less each month than is added to your accounts in interest and charges. As interest is added to your outstanding accounts this may well lead to an increase in the total sum you owe.

3. No legal protection from your creditors

A DMP is an informal agreement. This means that once in the plan, you are not legally protected from your creditors. They are therefore allowed to take further action against you if they wish.

4. Significant increase in repayment period

Because you are paying reduced amounts each month and interest may continue to be added, your debt repayment period will be significantly increased and may last many years.

5. Negative affect on your credit rating

Your credit rating will be negatively affected. Default notices will be recorded on your credit file. This will mean that you will find it difficult to get further credit for 6 years and until your debts are repaid or settled in full.

 

How long does a Debt Management Plan take to set up?

It takes approximately 4 to 8 weeks to set up a debt management plan. This timescale can vary dependent on the number of creditors you have and how long it takes for them to agree to your proposed repayment schedule.

 

How do I apply for a Debt Management Plan?

Simply complete the online assessment form on this page.