Debt Management Plan
Debt Management Plans are effective ways of getting out of control debts back to a manageable level. For those struggling with mounting debts and stressful contacts from impatient lenders, they can offer the relief of knowing that you are pursuing a settled debt recovery strategy without having to enter into more stringent legally binding solutions.
Our expert advisors are available to discuss this option with you today, explaining fully how this debt solution can be applied and if your circumstances mean you are eligible.
What is a Debt Management Plan?
Simply put, a DMP is an agreement put in place between an individual and their creditors, which helps bring debts back under control and ensures they can be repaid. By entering into such a plan you should be able to reduce the amount of payments you are making and consolidate your repayments to various creditors into a single amount.
With your new and affordable monthly payment you can regain control over your unsecured debts, while maintaining your privacy and avoiding public registers. Credit cards, store cards, overdrafts and bank or building society loans may all be included in a DMP, but this solution does not include council tax areas, rent arrears, utilities or penalties and fines.
It does, however, offer a clear path to financial recovery and with the support of our experts can lead you to a life after debt.
A DMP is a solution used in England, Wales or Northern Ireland. Scotland has something that is similar, but not quite the same and a bit more formalized, called a Debt Arrangement Scheme.
How does a Debt Management Plan work?
Debt Management Plans can vary depending on the level of debt, but can be arranged to give full consideration to your personal circumstances and financial situation. The higher the amount of debt you have, the longer it will be until you are able to clear what you owe, but with an affordable monthly payment and some patience it offers a route to success. A lower interest rate may also be available.
Throughout the DMP the monthly amount being repaid can be reviewed, in order to ensure that you are able to continue with repayments and afford your costs of living, such as household bills and essentials. Discipline will be required, but by committing to these regular repayments you are able to more easily manage the burden of your debts.
Why choose a Debt Management Plan?
It is designed for you – Our experts will help build the DMP, ensuring that it is affordable and respects your financial situation and circumstances.
It is flexible – With the support of our dedicated team you can be confident that it is a manageable plan, and that by reviewing it throughout the term any changes in circumstances can be assessed to ensure you do not slip back into financial insecurity.
It is concise – However varied your debts, a DMP allows them to be consolidated into one monthly repayment. This payment is gathered by your debt management company and paid by them to your creditors. With a DMP the days of juggling multiple payments and negotiating with a range of creditors are over.
Our team of experts will guide you through other options, such as Debt Management Plans and Bankruptcy, if this option is unsuitable for you. Before embarking on a DMP you might want to consider the disadvantages of the plan, which include:
Interest charges – Interest and additional charges may still be applied by your creditors, who are under no obligation to deduct or suspend these charges.
Creditor pressure – You creditors still have the right to correspond directly with you, and though your debt advisor will manage the payments you may still be contacted by them. A DMP does not prevent any court action, and creditors are still able to take direct action to recover debts from you.
Does a DMP cover all debt? Many types of debt are not included in a DMP, which focuses on non-priority debts such as overdrafts; finance; bank or building society loans; high apr loans; credit cards, store cards, catalogues or home credit and informal borrowing. Among the types of debt not included in a DMP are:
- Utility bills
- VAT, NI contributions and Income Tax
- Mortgage payments
- Rent arrears
- Secured loan
- Council Tax
- Child Support Payments
Disadvantages of a Debt Management Plan
No Legal Protection – Creditors are not bound in law to agree to a Debt Management Plan. They are permitted to still contact you and even take legal recovery action against you.
Interest & Charges – Creditors are not obliged to freeze interest and charges. They may do so on a goodwill basis, but there may be time limits to this.
Secured Debts – Any asset that has lending secured against it (think of a mortgage on a house or vehicle finance) that you do not want to be repossessed has to have the ongoing payments maintained, so a Debt Management Plan is not a form of debt relief from secured lending.
Priority Debts – Magistrate’s Court fines, court orders under matrimonial and family proceedings, etc. still need to be paid. An Debt Management Plan is not going to provide you with debt relief from these.
Duration – Depending on how much is owed, and how much you can afford to re-pay your Creditors, a Debt Management Plan may have to last for many years.
Beginning with a plan
To put a DMP in place you can speak to one of our advisors, who will give you an impartial summary of the process and assess your eligibility. They will make you aware of how the plan will work and the impact it will have on your financial record, such as your credit rating. Should you choose to proceed with a DMP as your best debt solution they will be on hand to support you through the process.