Debt Management Plan FAQ

Debt Management Frequently Asked Questions -

Everything you need to know before entering into a Debt Management Plan (DMP)

If you are struggling with your finances, it's vital that you make an informed decision and take the right advice before you choose the debt solution which works best for you.  This Debt Management Plan FAQ provides key information to help you understand how a Debt Management Plan may affect your life in both positive and negative ways.

The key below will help you understand the questions and answers on this page and how they affect you if entering into a DMP.

 

FACTS - Important information about how a Debt Management Plan works

BENEFITS - Advantages of entering into a Debt Management Plan

BE AWARE - Issues which may affect your relationship with your creditors, pending or potential court action and of course and your credit rating whilst entering into a Debt Management Plan.

 

1. How much do I need to pay into a DMP?
2. How long does a Debt Management Plan last?
3. How do I know my debts are being paid?
4. Will my creditors/lenders definitely accept your proposed debt management plan?
5. Is this a loan?
6. Do I have to tell my partner?
7. How do I know I'm getting the best advice?
8. What do you charge for this service?
9. What is the difference between a secured and unsecured debt?
10. Will you be dealing with every company I owe money to?
11. What if my circumstances change?
12. Will I be credit checked before acceptance?
13. Do creditors always accept reduced payment offers?
14. Do I incur any further charges if I cancel my plan?
15. Can I come on the plan if I already have County Court Judgements (CCJs) against me?
16. Will the plan affect my credit rating?
17. Will I still be able to afford my everyday expenses if I enter into a Debt Management Plan?
18. Does it make a difference if I am a homeowner or tenant?
19. Will I receive a Default Notice?
20. I am struggling to juggle the number of creditors I have and the number of different payments I owe - how will a Debt Management Plan help with this?
21. Do I have to be in full time employment?
22. Will the plan prevent my creditors taking further recovery action?
23. I am experiencing a lot of calls and letters from my creditors, is this something you can help with?
24. My bank says they will not deal with a Debt Management Company and will take me to court if I enter into a DMP. What should I do?
25. What if my creditors continue to pursue me for payments?
26. What happens if I come into extra money whilst in a Debt Management Plan, or alternatively have less income because of unexpected circumstances?
27. My bank (or other creditor) says you have not written to them, but you say you have. Why?
28. Will I be charged if I change my mind?
29. Will my creditors still charge interest on the debt owed to them?
30. My bank (or other creditor) say they are going to send a bailiff round to collect their money, can they do this?
31. Is a Debt Management Plan legally binding and what happens if I want to cancel it?
32. Can I keep one of my credit cards just for emergencies and not count this debt or credit card as part of a debt consolidation programme?
33. How are the fees collected?
34. If I enter into a Debt Management Plan, will I putting my home at risk?
35. How is my money held until it is distributed to my creditors?
36. What happens to any money held for distribution if I cancel?
37. Do I get interest on my payment that I make to you?

 

1) How much do I need to pay into a DMP?

Payments vary on individual circumstance.  After speaking with you about your income and expenditure, our team will work out an affordable payment plan. This will take in account essential monthly costs such as food, mortgage and utility bills. It's important once everything is agreed, you keep up your monthly payments and stay on top of your finances.  Failure to do this could result in your creditors cancelling the agreement and consequently bankruptcy may then be your only option.

Minimum payments for Debt Management Plans are £70 per month or £18 per week.

 

2) How long does a Debt Management Plan last?

A Debt Management Plan lasts for as long as it takes you to pay back the debt owed.  Although we do ask your creditors to freeze any interest on your debt, this isn't something they have to do.  With that said, most creditors understand that by freezing the interest on your debt you are able to pay them back much quicker.

It is important to note that as your Debt Management payments will be lower than what your creditors were originally demanding on a monthly basis, it will take you longer to repay them.

 

3) How do I know my debts are being paid?

Once we receive an up to date balance from your creditors, which ties in with the latest statements they have rendered, we will then distribute your monthly payments between them, proportionally, based on how much each is owed. A statement (at least annually) showing how much each creditor will receive will be sent to you for your own records. These payments and distribution proportions remain fixed unless your circumstances change. You will also be sent a quarterly statement showing all transactions on your DMP account with us. Finally, in addition to any documentation you receive from ourselves, your creditors will also send you statements confirming the payments we have made to them on your behalf.

 

4) Will my creditors/lenders definitely accept your proposed debt management plan?

Creditors and lenders do not have to accept any Debt Management proposal put to them, but most are willing to if we show it is beneficial to both parties. There is no guarantee existing or threatened proceedings against you will be suspended or withdrawn. Creditors may also continue to issue default notices and add additional costs to your debt. Please be assured that we will try our best to discuss your situation with your creditors and encourage them to freeze interest and charges on your debt.

 

5) Is this a loan?

A Debt Management Plan is not a loan. We do not lend you money or pay off your debts. A Debt Management Plan is a solution that allows you to repay your debt at a monthly rate that you can afford. If you fail to make payments into the plan, we cannot forward these to your creditors.

 

6) Do I have to tell my partner?

We do believe it is always best to be honest with your partner as the emotional burden of tackling your debt whilst keeping it a secret from those you love can often be too much. However, we don't force you to tell your partner - this is your choice.  The only exception to this rule is if you have shared debts and/or you need your partner's income to be taken into account to support the plan.

 

7) How do I know I'm getting the best advice?

As you can see from the about us section of our website, our company was built on ethics - ensuring there is a safe place for people in debt to go to with the confidence they will receive sound and accurate advice.  After discussing your situation with you, if our advisor feels your circumstances are not best served by a Debt Management Plan we will tell you. We will always advise you of your best options whether we make money from this or not.

Our advisors are part of the first group of industry specialists to qualify and take CertDR (Certificate in Debt Resolution). CertDR is accredited by Edexcel and welcomed by organisations such as the Ministry of Justice, Office of Fair Trading, Insolvency Practitioners Association and the Insolvency Service. The qualification was officially launched in 2009 by the Debt Resolution Forum (an Industry Body that we are a proud member of) and created to ensure a consistent standard of high quality customer service, knowledge and ethics within the debt solution industry.

 

8) What do you charge for this service?

Our fees are fully explained on this website, however, in brief, 100% of your first monthly payment and 90% of your second payment is taken as the setup fee. We pay the remaining 10% to your creditors as a token payment on your behalf. After that, all future payments will be paid to your creditors less 17.62% which is taken to cover the cost of our administration services.  To explain the work we do to manage your account with creditors and facilitate the payments please see our fees page.

 

9) What is the difference between a secured and unsecured debt?

A secured debt is a debt secured against an asset that you own. An example of a secured loan is a mortgage (secured loan) on a house (the asset), or a car loan (secured loan) and a car (the asset).  In this scenario, should you fail to keep up the payments on this type of loan, the loan company can take possession of the asset.  Debt Management Plans do not deal with secured debts (other than, sometimes, arrears).

An unsecured loan is a loan not secured against an asset, such as a bank overdraft, a personal loan, a credit card, store card, etc. This type of loan is dealt with within a Debt Management Plan.

 

10) Will you be dealing with every company I owe money to?

No. If you have what is considered a priority debt, such as your mortgage/rent/utility bills, then due to the serious consequences of not making these payments, we do not include them in your Debt Management Plan.  These payments are instead, set out as priority costs to be made each month, aside from your DMP payments. The amount needed to make the priority debts will be taken into consideration when calculating the amount you can pay into your DMP each month which is then distributed  to your remaining creditors.

 

11) What if my circumstances change?

A Debt Management Plan is an informal arrangement and there is no legal agreement connected to it.  With this in mind, you are at any time, able to adapt your DMP if your personal circumstances change. You can discuss changing the amount given in your monthly payments (as long as they are a minimum of £70 a month), or you can look at alternative arrangements (such as an IVA) which may suit you better at a later date.  Should you decide to terminate your Debt Management Plan, you can do this by sending a letter notifying us of your decision, giving 28 days notice.

12) Will I be credit checked before acceptance?

No. Since we do not lend you any money, we do not need to credit check you.

 

13) Do creditors always accept reduced payment offers?

Creditors are under no obligation to accept a repayment from you in the form of a debt solution as this generally means your repayments will be lower than the minimum amounts they bill you for.  Despite this, creditors do recognise a consumer's efforts to repay the debt owed by entering into a debt solution and will, in most cases, accept a proposal where we can demonstrate that the offer is reasonable and that you are committed to repay your debts through our debt management service.

 

14) Do I incur any further charges if I cancel my plan?

No, you can cancel your Debt Management Plan with us at any time without any further charge although we do require 28 days notice.

 

15) Can I come on the plan if I already have County Court Judgements (CCJs) against me?

Yes. A Debt Management Plan also allows you to make payments against any existing CCJs that you have as well as your other debts. In cases such as this, it is vital you let us know exactly what your current situation is when you talk to us before coming on plan.

 

16) Will the plan affect my credit rating?

When entering into a Debt Management Plan, your first few payments will actually go towards covering the administration and management of your arrangement.  This will consequently place you further into arrears and will therefore also affect your credit rating. Despite this, it is important to note that your credit rating may already be poor if you have arrears or a history of missed or late payments.

 

17) Will I still be able to afford my everyday expenses if I enter into a Debt Management Plan?

A Debt Management Plan is designed to not only help you repay your debt, but to identify the essential expenditure you need to budget for.  Working this out, enables us to then agree the remaining income left which can be allocated to repaying your debt.

 

18) Does it make a difference if I am a homeowner or tenant?

No. It makes no difference whether you are a tenant or homeowner or even if you are still living with your parents.

19) Will I receive a Default Notice?

By entering into a Debt Management Plan, you will be in default on your original credit agreement and your creditor will therefore be entitled to send you a Default Notice. Creditors send out Default Notices to protect their own legal position.

 

20) At the moment, I am struggling to juggle the number of creditors I have and the number of different payments I owe - how will a Debt Management Plan help with this?

A Debt Management Plan takes one monthly payment from you and distributes it proportionally amongst your creditors at a repayment rate agreed with them.

 

21) Do I have to be in full time employment?

Not at all. To be accepted onto a Debt Management Plan, you need to have a surplus of income above what you need to live on, in order to make your monthly contributions.  As long as you can afford this your employment status is not an issue with regards to the security of your DMP.

 

22) Will the plan prevent my creditors taking further recovery action?

Although creditors do welcome your decision to enter into a Debt Management Plan and tackle your debt head on, we cannot guarantee they will drop any further action, including court action, to recover debts owed.

 

23) Whilst I am struggling to re-pay my debt, I am experiencing a lot of calls and letters from my creditors, is this something you can help with?

Of course. As soon as your Debt Management Plan is in place, we will liaise directly with creditors on your behalf. It's important to be aware that although we will not be officially representing you until you make your first payment to us, we are aware of the emotional strain you can experience from creditor contact and do encourage you to immediately direct them to us and explain you are in the process of setting up a Debt Management Plan. As soon as you have made your first payment to us, we will be officially informing your creditors that we have taken over the situation and that they should then be liaising directly with our team here. At any stage of this process, we are always on hand to offer you support and advice.

 

24) My bank says they will not deal with a Debt Management Company and will take me to court if I enter into a DMP. What should I do?

A creditor cannot refuse payments from a debt management company and then take you to court for non-payment. Some credit companies may prefer not to deal with a Debt Management Company so they can apply more pressure to you but many are now very used to dealing with organisations such as ours and recognise you have a legal right to have anyone you wish deal with your finances.

 

25) What if my creditors continue to pursue me for payments?

Whilst you are setting up your Debt Management Plan and completing all the necessary paperwork it's highly likely that your creditors will continue to take action to recover your debts. It's vital you do not ignore these. You must continue to deal with calls politely, inform creditors you have appointed our company to act on your behalf and forward any letters to us so we can deal with them on your behalf.

 

26) What happens if I come into extra money whilst in a Debt Management Plan, or alternatively have less income because of unexpected circumstances?

Should at any time, your finances change for the better or worse, you can speak with a member of our team and change your plan. Should you come into any extra money, we do encourage you to pay any this in to your Debt Management Plan to pay off your debt sooner, but the decision is yours and there is no obligation to do this.

As long as you can continue to make a minimum payment of £70 a month, a change of circumstances would not jeopardise your Plan.

 

27) My bank (or other creditor) says you have not written to them, but you say you have. Why?

If this happens it's important you inform them we are dealing with your affairs and contact us immediately.  We will then issue a further copy of correspondence by post and email.

Employees of a creditor's collections unit have one job, to try to get you to pay money. Some will do this any way they can. Once they acknowledge we are dealing with the account, they know they have to negotiate through us. Unfortunately, because of this, some collection units may tell you they have not heard from us to give them more leverage and encourage you to pay their fees. If they make you think we are not doing our job properly, they will try to convince you to cancel the agreement with us and then use any tactics they like to get the money from you.

28) Will I be charged if I change my mind?

Not if it's within the 7 working day "cooling off" period.

Going into a Debt Management Plan is an important decision and because of that, it's vital you take the time to read all information given to you and consider all effects on your life that the Plan will bring.  You must be clear in your head and confident you are happy to continue with this choice of solution.  To give you this time, there is a 7 working day "cooling off" period from the date you accept our Terms and Conditions/Terms of Business for Debt Management or, if earlier, from the date your first payment is received. If you decide not to continue with the plan within the "cooling off period" we will refund your initial fee.

At any time during your arrangement with us, you can ask for proof of work carried out on your behalf or cease the plan when giving 28 days written notice..

 

29) Will my creditors still charge interest on the debt owed to them?

Although we can't guarantee your creditors will cease charging interest on your debt in most cases they do acknowledge the fact that you've chosen to enter into a Debt Management Plan and agree to freeze any further interest. Due the long standing relationship we have with most creditors, we are able to do this for our clients, but are unable to guarantee this for you.  Most creditors understand that by freezing your debt, you are able to pay them back over a quicker period of time.

30) My bank (or other creditor) say they are going to send a bailiff round to collect their money, can they do this?

No. Bailiffs can only be instructed and sent by a County Court or Sheriffs office.  This means a bailiff can only call if you default on a court order. A debt collector may try to trick you by saying, "if you don't pay this bill, we could send a bailiff round" this is not true unless you've defaulted on an earlier court order. For more info on bailiffs, please read our guide here.

 

31) Is a Debt Management Plan legally binding and what happens if I want to cancel it?

No - a Debt Management Plan is not legally binding.  A Debt Management Plan is a quick process to set up and there is no requirement to involve the courts. For people who can only afford £70-100 a month repayment, this is often a more manageable way to work towards a debt free future. Should at any time you wish to cancel your Debt Management Plan, you can do this by writing to us and giving us 28 days notice. The notice period starts from the day you write the letter to us, not from the day we receive it.

 

32) Can I keep one of my credit cards just for emergencies and not count this debt or credit card as part of a debt consolidation programme?

No. It's important that when you enter into a debt solution, be it a Debt Management Plan or an IVA, that you are fully committed.  This means giving up any credit facility that might tempt you back into spending money you just don't have.

If any of your other creditors find out you are treating another company more favourably, they will be more inclined to reject any offers made to them and may look to collect money through court action. All creditors have to be treated equally.

 

33) How are the fees collected?

We distribute money to your creditors within 5 working days of receiving your monthly payment which has been cleared through your bank account to ours (cleared funds). Every time we make a distribution to your creditors on your behalf, we deduct our fee for that distribution. If we do not make a distribution, we do not take our fee.

 

34) If I enter into a Debt Management Plan, will I putting my home at risk?

No. Unlike a secured debt consolidation loan, a Debt Management Plan does not put your home at risk. And, unlike an IVA, no contribution from home equity is required.

 

35) How is my money held until it is distributed to my creditors?

We hold all monies sent to us for distribution to creditors in a client account with our bankers. This is a trust account for the benefit of all our clients' creditors but specific to your creditors. This means that your money is completely protected even in the event of our insolvency. No interest is accrued on this account.

 

36) What happens to any money held for distribution if I cancel?

We will refund to you any monies you have paid us which we have not yet distributed at the time you cancel with us.

 

37) Do I get interest on my payment that I make to you?

Because your payment is only held for a maximum of 5 days before being distributed to your credit companies no interest is paid.