Streamline Debt Repayments With A Debt Management Plan
Are you struggling to pay off your debts? Are you feeling overwhelmed and hopeless? You’re not alone. Millions of people are in the same boat. But there is hope. You can get out of debt, but it’s going to take some work. Read on for information on how to get started.
What is a Debt Management Plan?
A Debt Management Plan (DMP) is an informal agreement between you and the people you owe money to (creditors). A DMP will state that you will pay back the money over an agreed period of time.
Your monthly payback rate will depend on how much you can afford.
What makes a DMP different to a lot of the other debt solutions available on mymoneyoffice is the fact they are not legally binding. This means that although your creditors might firstly agree to your terms; they can go against the agreement at any point.
Unlike IVAs, DMPs will not protect you from legal action and they will also not protect your assets.
It is possible to freeze interest charges on debts using a DMP however that is down to the creditors, within a DMP creditors are not legally obligated to do this.
DMPs are very flexible due to the fact they are not legally binding. This means that if you need to make adjustments to the agreement based on future circumstances then this is entirety possible and can be made relatively quickly.
Pros and Cons of Debt Management Plan (DMP)
Pros
- Streamline all of your debt repayments into one single monthly payment.
- Repayments are diluted to make them affordable based on your essential household expenditure.
- A DMP Is very flexible and so the agreement can be reviewed at any point during the agreement.
- Some creditors will agree to freeze interest on repayments as part of the debt management plan.
- Clients may be able to retain assets that could be at ‘risk’ of formal insolvency procedures.
Cons
- Creditors do not have to freeze interest on repayments, this means that your DMP could end up costing you more than it should in the long run.
- Reducing payment for a longer period of time could have an affect on your credit score.
- There is no protection from creditors which could result in legal action.
- You are unable to include HMRC debts into a DMP. This means you will need to make arrangements directly with HMRC to outline the best course of action.
How does a Debt Management Plan work?
A Debt Management Plan (DMP) is broken down into 3 steps.
Qualification
Complete our free solution finder, we’ll understand your circumstance and then create the best solution for you. If we believe you fit the criteria for an IVA you will be alerted by one of our specialists. Or you can call us directly …
Quick Chat With Our Specialist
Our friendly specialists will have a 5 minute discussion of your situation and run you through your options. This process is 100% free and confidential.
Your Choice
If a DMP is the best solution for you, our specialists can help motion this whenever you’re ready. This will put you on the path to becoming debt free!
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(These are some hypothetical examples of clients using an IVA)
Sean Anderson
£11000 in Debt
- Council Tax
- Credit Cards
- Mortgage Arrears
Previous monthly payment: £740pm
New Payment
£
0
Per month
Daniel O’Brian
£6500 in Debt
- Credit Cards
- Payday Loans
- Mortgage Arrears
Previous monthly payment: £510pm
New Payment
£
0
Per month
Chloe Doran
£31000 in Debt
- Credit Cards
- Mortgage Arrears
- Payday Loans
Previous monthly payment: £1100pm
New Payment
£
0
Per month
What to do If your IVA application is rejected?
(list of creditors)
IVA
A solution for people with over £6000 worth of debt, you must also owe more than one creditor. An IVA is a legally binding agreement which can help write off up to 81% of debts over a 50 – 60 months period.
Debt Management Plan
A Debt Management Plan or DMP, is an informal agreement between you and your creditors to pay back lower priority debts, this will reduce your monthly outgoings to an affordable figure each month.
Bankruptcy
Bankruptcy is a formal solution designed for those who physically cannot repay debts. Bankruptcy is often viewed as the last resort but can be a good solution for those who cannot make any repayments.
Don't know where to start?
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The Money Advice Service is a free and impartial organisation, created by the Government, with the goal of
providing debt counselling, debt adjusting and credit information services to those in need. Individuals can
get professional free advice on how to manage their financial burdens by visiting www.moneyadviceservice.org.uk
