Debt Management Plan (DMP)
Debt Management Plans, which are known as DMPs for short are an effective way to
get your finances back in order. They allow you to pay what you can afford though
a flexible plan that adapts to your circumstances. They are not legally binding
and are usually for debts up to £15,000. For larger debts, an Individual Voluntary
Arrangement (IVA) or Trust Deed (for Scottish Residents) may be more appropriate,
if you are unsure, please call for friendly advice on 01902 585 017
How a Debt Management Plan (DMP) Works
Following an in depth financial assessment, we will contact all of your creditors
(the companies to which you owe money) to find out what exactly you owe. We will
also assess what you can afford to pay based on your income and expenditure, this
amount is known as your disposable income (DI). This is what you will pay into your
Debt Management Plan regardless of what you owe.
All outstanding unsecured debt is then bundled together and we pay out each month
to your creditors in proportion to the amount that you owe to each of them. Don’t
worry if you are struggling, we will assess what you can afford and base any new
payments to your creditors will this in mind.
You need to continue paying your priority debts such as your mortgage, rent, electricity etc.
Benefits of a Debt Management Plan (DMP)
A Debt Management Plan will:
- Combine all your unsecured debts into a single monthly payment based on your circumstances
- Depending upon the outcome of negotiation with your creditors, reduce or freeze
interest and charges on what you owe
- Give you someone who understands and has a good relationship with the creditors
who can deal with them on your behalf
- Allow you to pass all creditor correspondance to us to deal with. You should never ignore creditor correspondance
- Put you back in control of your finances so you know where your money is going each
month
Potential drawbacks of a Debt Management Plan (DMP)
Debt Management Plans are not for everyone, you are best to seek advice form a professional
if you are unsure. You should be aware that a Debt Management Plan may:
- Extend your payments over a longer term in some cases
- Increase the total sum to be repaid
- Not always result in the reduction of interest or charges for every creditor
- Not necessarily stop all correspondence or phone calls from creditors
- Not cover any debt secured on assets or tax arrears
- Damage your credit profile or result in lenders registering defaults
- Result in additional arrears at the outset due to paying our set up fees and there
being insufficient available money to pay your creditors.
- Should you stop making payments to your DMP your creditors may recommence a more
intensive collection process to recover arrears. They may no longer freeze interest
and charges where applicable
Important Information About Our Service & Fees
Whilst we strive in all cases to negotiate the best deal with your creditors, we
cannot guarantee a reduction in interest or charges. Whilst we are able to provide
initial advice over the phone without charge, if a debt solution is taken out, please
be aware that fees will be charged. We aim to keep these fees as low as possible
and believe that we are very competitively priced, for detailed information on our
fees, including examples for each product, please click this link
What if you decide that you don't want to go ahead?
You are provided a cooling off period of seven days from the date you sign our terms
of business during which you may cancel our agreement at no cost. After this time,
should you give notice to us that you would like a refund of a payment, or payments,
(being other than the initial fee) then where no distributions have at that time
been made by us, or are in the course of being made by us on your behalf, a full
refund of the undistributed funds will be made. Where we have commenced distributing
funds on your behalf, we will refund undistributed payments less our 11% management
fee.
Will your credit be affected?
Potentially Yes - Click here
The Insolvency Service has produced a guide: In Debt? Dealing With Your Creditors.