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 As the name suggests, this is a plan to help you manage your debt problems. Depending on how much you owe and your circumstances, a Debt Management Plan might be the right solution, enabling you to repay your debts at a rate you can afford. This can provide some short term relief and help you to sort out your finances.
Unlike an IVA however, a Debt Management Plan is an informal agreement with your creditors and is not a legally binding contract. The advantage is that because you are not tied into a contract, you can stop the plan at any time, for example if your financial situation changes for the better.
With a Debt Management Plan you can choose a company like DebtManagement.co.uk to handle it for you and help ease creditor pressure.
Our friendly advisors can give you more information about whether a Debt Management Plan is right for you. Call today on 0800 690 6853.
DEBT MANAGEMENT PROs and CONs
PROs
- Your monthly payments are reduced to an affordable repayment
- Creditors may agree to freeze/reduce interest and charges
- With a Debt Management Plan in place, creditor hassle will ease
- You will have peace of mind knowing that your creditors are being handled by a professional company
- If your situation changes for the better or worse, you can change your debt management plan accordingly
- At DebtManagement.co.uk we work for you and not your creditors.
CONs
- A debt management plan is an informal arrangement - it is not legally binding
- Creditors can refuse to freeze/reduce interest and charges and may still contact you, although we will be able to advise you on this and speak to them for you.
- If the repayment term is lengthened, the total amount of debt repaid can increase.
- Your ability to obtain credit in the future will be affected
DEBT MANAGEMENT PLAN FAQs
How do I repay my debts?
You make just one affordable monthly payment based on what has been agreed in your Debt Management Plan.
Do I need to be in regular work?
You don’t need to be in regular work to be eligible for a Debt Management Plan, but you will need to have disposal income after having paid for day to day living costs and expenses, and any priority and secured debts.
How long before I’m debt-free?
This depends on how much you owe - plus, as you are repaying your debts at a reduced rate, it may take longer to become debt-free. Our advisors will be able to give you an estimate when they speak to you.
Can I change my Debt Management Plan?
Yes. A Debt Management Plan is not a legally binding contract so you can change it if you need to - for example, if your financial situation changes for the better or worse.
Do creditors always agree to Debt Management Plans?
Not always - but we are used to handling Debt Management Plans and dealing with creditors and can negotiate on your behalf. If you want us to handle your Debt Management Plan we will work with you to draw up a comprehensive proposal and our goal will be to achieve the most successful outcome..
What happens if I fail to make my monthly payments?
If you fail to keep to your Debt Management Plan, your creditors may take action against you.
Our initial advice is free, however if you decide to proceed with a plan then fees will apply. Click here for more on our fees
To view the Government Insolvency Service document on debt solutions click here:
In Debt - Dealing with your creditors
To find out more about whether a Debt Management Plan is the right debt solution for you, talk to one of our friendly advisors today on 0800 690 6853.
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Our Fees Explained
Our fees fall into two main categories:
1. Initial Set Up Fee
Our initial set up fee is charged as follows:
Month 1 – 100% retained
Month 2 – 100% retained
Month 3 – 50% retained 50% distributed to your creditors in pro rata payments
Your Initial Set Up Fee covers the work involved in setting up your debt management plan which includes:
- preparing your financial statement for your creditors;
- updating your creditor information into our system;
- calculating the pro rata offers of payment for your creditors;
- contacting your creditors to negotiate the reduced payment arrangements and the reduction or stopping of further interest and charges on your accounts.
2. Monthly Management Fee
Our Monthly Management fee is equivalent to 15% of your monthly payment and will payable from month 4 onwards after your set up fees have been paid. It is subject to a minimum payment of £25.00 per month.
Your monthly management fee covers the cost of the ongoing work which is involved in keeping your debt management plan running smoothly, as well as for the services and expertise of your personal account manager. This work involves:
- paying your creditors in line with their agreements each month;
- handling all phone calls and post from your creditors;
- issuing a monthly statement to you to keep you up to date with the payments we are making to your creditors on your behalf;
- calling you each month to make sure that you're happy with how your plan is working and checking if your circumstances have changed;
- formally reviewing your account every 6 months and informing your creditors of the outcome of that review;
- assisting you with any legal proceedings your creditors may look to take against you.
- dealing with any queries or issues that you may have whilst your debt management plan is in place.
- Renegotiating reduced payment arrangements with your creditors if you fall into difficulties or your circumstances change whilst you are on your debt management plan which results in you having to reduce your monthly payment.
As you will be missing a payment to your creditors in the first month of your debt management plan your accounts will fall into arrears or further and you may receive a default notice which could stay on your credit file for 6 years.
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Debt Management
Reduced Stress