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Problem Debt – How a Debt Management Plan Could Help You

Published on:February 16, 2017Author:Lucyna Rynkiewicz-Jones

 

 

A Debt Management Plan “DMP” is an informal arrangement between you and your creditors which allows you to repay your debts, in full, at a rate that you can afford. DMP’s are really only appropriate if you are struggling with debts you cannot afford to repay.

Our minimum criteria for a debt management plan that we will manage is:-

  • Minimum debt level of £4,500
  • After your reasonable personal and household expenses, you can afford to pay at least £80 per month
  • You have at least 2 unsecured debts and these need to be with 2 different lenders

What does it cost?

The fees that we charge are very reasonable considering the amount of work involved in setting up the debt management plans and then managing them each month.

Management Fees

Our monthly management fee is 17.5% of your monthly contributions. If your monthly contribution is £99.99 or less, this is subject to a minimum of £25 per month. For monthly contributions of £100 or more, a minimum fee of £30 per month applies. All DMPs are subject to a maximum monthly fee of £100 per month.

We charge a small extra fee during the first 6 months of the plan to cover the work we need to undertake to set up the plans. The enhance fee is calculated as:-

  • Up to 5 active creditors £10 per month
  • 6 – 10 active Creditors £15 per month
  • 11 + creditors £20 per month

The fee covers the work we undertake in setting up your plan which includes drafting your debt management plan, sending it to creditors, liaising with creditors to gain their acceptance of the plan and dealing with creditors’ queries. In addition, our fees cover distribution of your payment to creditors and handling creditor and client queries.What does the service cover?

How do I apply?

Complete a contact form or call our team on the free phone 0800 0851 825. Our advisors are available Monday through to Thursday from 9.00 am to 8.00 pm. Friday the hours are 9.00 am to 5.30 pm and we are also available on Saturdays from 9.00 am to 1.00 pm.  If it is clear you are struggling with problem debt, we talk to you about all appropriate solutions.

The Benefits

  • The major benefit that we find our clients appreciate is having us liaise and deal with all creditors and their correspondence. This includes dealing with phone calls, letters and takes away the stress of creditor interaction.
  • If creditors freeze interest and charges, a DMP can help you clear your debts in a reasonable period of time.
  • If you’re struggling to meet your normal payments to creditors, a DMP allows you to pay an affordable monthly contribution
  • A DMP is flexible. You can terminate your plan at any time.
  • A DMP is an informal solution and should ideally provide for you to clear your debt in less than 10 years. If the plan looks like it could take more than 10 years, a DMP may not be appropriate unless you feel your circumstances are likely to change which will enable you to clear your debt in a 10 year period.
  • We expect creditors to either stop further action to collect your debt or not to take such action. Our team are attentive and will work hard to ensure creditors do accept your plan.

The Risks

  • A DMP is an informal debt solution and creditors are not obliged to freeze interest and charges. Some creditors may agree to reduce interest charges rather than freeze them. Continued charges could result in it taking longer and costing you more to repay your debts.
  • As a DMP is an informal arrangement, there are certain debts such as arrears of council tax which cannot be included due to the risk of action against your assets. There are other solutions such as an IVA which can include arrears of priority bills.
  • A DMP could have a negative impact on your credit file. Creditors can issue default notices which will remain on your credit file for 6 years. Your ability to obtain credit will be affected.
  • You may from time to time receive an unwanted call from a creditor especially if they are using a debt recovery company. Politely tell them you are in a DMP and state our company name and your personal advisor. We will take care of the rest.
  • We cannot guarantee that creditors will not take legal action or that they will stop collection activity. Such action could result in a judgement and could potentially lead to a charging order if you have a property.
  • If you cancel your DMP, creditors could end payment arrangements previously agreed and charges could be reapplied to your debts.

If you find you need some help with budgeting or are worrying about problem debt, get in touch. Problem debt is debt where the monthly repayments are eating into the money you need to live on. There a range of solutions to help you deal with such debt and could include an DMP which can allow you to *write off debt which you cannot repay.

The Debt Advisor can help you set up an DMP. We will review your circumstances and offer advice on all options that might suit your needs. We will also explain how the fees are paid out of your contributions.

All debt solutions need to be carefully considered. IVA’s are formal solutions and failure to keep to the terms can result in your IVA failing and you could end up bankrupt.

There is also free debt help and advice available through a variety of debt charities. For more information, we recommend you visit www.moneyadviceservice.org.uk.

The Debt Advisor is Authorised and regulated by The Financial Conduct Authority (reg no: 606669).