What is a debt management plan?
Could a Debt Management
Plan (DMP) be your solution? If
you have debt above £1500 to more than one creditor
then a Debt
Management Plan could be right for you!
What is a DMP?
Debt Management Plans are provided by debt management companies
who negotiate with your creditors to change your debt repayment
terms. A Debt Management Plan (DMP) can be a good debt solution,
especially if your problems are likely to be short term.
There can however be some negative effects to Debt Management
Plans and it's worth reading our breakdown of the advantages and
disadvantages of a Debt Management Plan to get a better
understanding of these.
Sometimes, especially if you don't owe very much in total,
creditors may ask you to try a debt management plan before being
considered for an IVA.
In a Debt Management Plan we will negotiate with your creditors
to try to get them to accept lower repayments and obtain a freeze
on any further interest that might otherwise be added to your
current debt. We are often able to do this and, when not all
creditors agree to this at the start, we will continue to negotiate
with your creditors whilst you keep up the payments to you Debt
Management Plan.
What are the features of a Debt Management Plan (DMP):
- Reduce your monthly repayments
- We handle negotiations with all creditors
- You must be able to afford a £100 payment each month (however
in some exceptional cases we may be able to reduce this to £80 per
month)
A Debt Management Plan works by enabling us to take one affordable
monthly payment from you. It's affordable because we calculate it
against guidelines that ensure you have what you need to live
(things like your housing costs, children's and pets' needs, etc
are all taken into account: These guidelines have been agreed with
creditors and are usually accepted). We then distribute this to all
your creditors proportionately based on what they are owed - this
means everyone gets their fair share. Within these payments
we do deduct our initial and, thereafter, monthly fee. By
letting us help you this way, you can pay off your debt with the
comfort that although finances may tight for some time to come, you
will be able to make headway and work towards a debt free future
with a clear mind and head held high.
Complete our short contact form and we can help you decide if a
Debt Management Plan can help you:
Complete the call-back form now>>
Debt Management Plans are provided by debt management companies,
like our sister company Abacus, who negotiate with your creditors
to change your debt repayment terms and are an alternative option
to an IVA, DRO (Debt Relief Order) or Bankruptcy.
Debt Management Plans (DMPs) can be a good debt solution,
especially if your problems are likely to be short term.
A debt management plan can be put in place by a debt management
company or made by yourself ("self help debt management").
Sometimes commercial and charitable (free) debt management plans
are simply a step on the road to bankruptcy, offered to debtors who
are terrified of the word insolvency. However in many circumstances
they can be an appropriate solution, especially if you can nearly
pay all your debts or if you strongly believe your problems will be
short term.
Who is a Debt Management Plan suitable for?
Every individual's circumstances are different so click here to view some
of our debt management plan case studies which show how a debt
management plan worked an individual who was self employed and
didn't want to risk the equity in his home, a couple who were
expecting a baby and somebody who found themselves in debt because
of illness.
Debt Management Companies
Commercial debt management, with a debt management company, is
similar to self help debt management except that someone else is
doing it for you. There are many different firms offering this
service and most charge a fee. Some are overtly commercial (like us
- anyone who is must not pretend to be a charity); some (even a
major charitable one) are funded by the banks and credit card
companies themselves.
What are Debt Management Plan Fees?
Debt management companies will usually ask you to pay them as
much as you can afford. They may negotiate with your creditors to
accept lower repayments or obtain interest freezes. Commercial Debt
Management companies are often able to do this - it isn't only the
debt management charities, who offer free debt management plans,
that succeed here. They pass the money to your creditors less their
initial and, then, monthly fee. This is usually around 15%-20%.
Read about our debt management fees.
Debt management companies also take the single payment from you
each month and distribute it to your creditors within five working
days. Sometimes a charity will give you great advice but no help in
distributing your money to the people you owe.
What is self help debt management?
Self help debt management involves you renegotiating your
payment terms with your creditors. If your debts are not so serious
and you approach your creditors first to deal with your problems
you will usually find them sympathetic and helpful to you. If you
leave the debt management process until they threaten to take
action against you it is often much harder to negotiate with them.
You need to be tough to negotiate a good deal - often; they will
refer you to a debt management company or charity in any
case.
Take care though; some of the debt management plans we have seen,
even from the more public-spirited providers, are scheduled to last
more than 10 years and often only reduce debt by small amounts,
compared with an IVA which, usually on a very similar monthly
payments, ensures you are debt free, more often than not, in five
years.
We'll call you - send
my contact details now »
The Government's Insolvency Service have put together a debt
guide which you can download now as a pdf document here: In
Debt? Dealing with your Creditors
