Debt Management Plan (DMP) FAQ's
Below is a list of the most frequently asked questions about DMP. If the question you want answered does not appear please do not hesitate to contact us and we will answer it for you.
- What is a debt management plan.
- Is a debt management plan a loan.
- Will I be credit checked.
- Will I keep getting letters and phone calls from my creditors.
- Can I pay more or less if I want to change payments.
- Do I need to change banks.
- Do I need to cancel my direct debits.
- How will I know my creditors are being paid.
- Will this affect my credit rating.
- Does it make a difference if I am a homeowner.
- Do I have to tell my partner.
- Does a management plan cover all of my debts.
- What is the difference between a secured and unsecured debt.
- Do creditors always accept reduced payment offers.
- Can creditors refuse to accept payments under a management plan.
- Will I receive a Default Notice.
What is a debt management plan?
A DMP is an informal agreement designed to allow a person who is struggling to meet their monthly debt repayments the opportunity to make a single more affordable monthly payment via a debt management company. In return for a management fee the company passes these payments to the debtors creditors until their debts are cleared. The most important part of the management companies duties should be to negotiate an interest and charges freeze on the debtors outstanding accounts and then regularly ensure that creditors continue this freeze during the term of the DMP. They should also ask creditors not to take any legal or recovery action providing the debtor keeps making their regular payments. Amongst their duties the management company also agrees to handle/reply to creditors letters and enquires. Learn more.
Will I keep getting letters and phone calls from my creditors?
It is highly likely that you will still receive letters and phone calls from your creditors as the agreement reached is informal and therefore not legally binding. However, these letters and calls should become less frequent the longer the plan is in place and the creditors realise they are receiving regular payments.
Do I need to change banks?
If your current bank is one of your creditors the you should change your bank to one that you do not owe any money too. If you fail to do this there is a strong possibility that when your wages are paid into your current bank they will keep your money and offset it against what you owe them.
Will this affect my credit rating?
It is more than likely that the management plan will have an effect on your credit rating as you will not be making your contracted repayments. However, if you are seen to be making regular payments through your plan then this should have a positive effect. You should bear in mind that if you are currently experiencing debt problems it is a possible that one or more of your creditors may have already recorded this information with a credit reference agency such as Equifax or Experian.
What is the difference between a secured and unsecured debt?
A secured debt is a debt secured against an asset that you own. Typical secured debts will be a mortgage, a secured loan, a car loan, etc. An unsecured loan is any loan not secured on an asset, such as a bank overdraft, a personal loan, a credit card, store card, etc.
Do creditors always accept reduced payment offers?
Creditors do not have to accept any offer of repayment below the contracted minimum. However, they are normally prepared to accept reduced repayment offers where you are able to demonstrate that the offer you are making have is reasonable and that you are committed to repay your debts.