Debt Management UK

A Debt Management Plan may be the right debt solution for you. For debt management plan advice and debt help contact the Re10 Debt Advice Helpline if you live in the UK.

Your debt management company will negotiate with your creditors and manage your payments to them. The arrangement the company negotiates for you with your creditors is called a Debt Management Plan (DMP).

Your creditors will want details of your assets, including your home, if you own it. This helps them decide whether the offer you make through the debt management company is reasonable or whether they expect any of your assets to be sold so that they get a larger payment.

The individual or company you choose to manage your plan must be licensed and regulated under consumer credit law. Some will not charge you a direct fee for their services, but will get it from the creditors, for example, out of the payments you make to them. Others may make an initial charge for preparing, negotiating and administering your plan and then take the rest from your monthly payments.

In either case, before it asks you to sign up for a DMP, the company should give you details of the fees it wants to charge you, and how you must pay them.

A plan can last for 5 years or much longer, depending on how much you owe and what you can pay each month or quarter. Your debt management company should give you an estimate of how long the plan will last. They should also review the plan every year, and creditors will expect to be given regular updates of your income and spending so they can see whether you can increase your payments

Pros of DMPs

• Fair and open way of sharing payments, widely understood by creditors
• The debt management company will help you prepare your plan, including agreeing the level of your household and personal spending based on guidelines, which can then be used to put your case to the creditors
• The debt management company will negotiate with creditors on your behalf, so offers are more likely to be accepted and interest frozen than if you try to do this yourself
• You may be able to vary your payments if your circumstances change
• You make single payments each month or quarter to the debt management company, which is responsible for administering all payments to your creditors
• Any monthly payment you make should be passed on to creditors within 5 working days
• Some debt management companies do not charge you a fee
• Creditors may be prepared to write off the balance of what you owe after a period of
  time if
  • you have shown that you have made every effort to repay them as much
    as you can; and
  • you have maintained regular payments to the debt management company

Cons of DMPs

• The debt management company can’t force creditors to accept your proposal or freeze interest. A plan is not binding on creditors who refuse to take part in it, but they can’t refuse to accept any payments made to them
• You remain liable to pay your debts until they are paid in full
• Creditors could still take enforcement action against you, for example by getting a county court judgment and then an order, which creates a charge on your home, even if you are keeping up your payments under the plan, unless they agree not to do so
• You may not be able to make reduced offers if your circumstances worsen and you can no longer afford your agreed monthly payments
• A plan can last for several years. However, some creditors may be prepared to freeze interest for only a shorter time. If interest and charges cannot be frozen for the full length of the plan, then the total amount you end up paying under the plan could be more than the original amount of your debts, and could extend the lifetime of the plan

Getting in touch with an insolvency expert for free debt advice is as easy as picking up the phone. Call the Re10 Debt Advice Helpline on free phone 0800 169 1536