This page includes the questions most commonly asked about debt management plans, or DMPs, and answers to these questions.
The information provided may answer your questions but if it does not, please contact us. Jubilee Debt Management experts have the answers and are ready to help you to tackle your debt problem.
Would you please describe a debt management plan?
The DMP is an informal arrangement for people who are struggling to make their monthly debt repayments.
A debt management company (or charity) serves as the administrator, conducting negations with creditors individually and requesting a freeze of interest and fees. The debtor issues a single monthly payment to the debt management company.
This affordable amount covers all debts included in the DMP. The debt management company submits the appropriate portion of the payment to each creditor.
This process takes place every month while (hopefully) the freezes on interest and charges remain in place. The debt management provider asks creditors to refrain from taking collection or legal action during the DMP period, provided that the debtor makes monthly payments as agreed. The provider also handles inquiries and letters from creditors. Once all covered debts are cleared, the DMP ends.
This plan offers several advantages:
- Reduced monthly payments
- A single monthly payment makes it easier to stay on track with debt repayment
- Creditors may freeze interest and other charges
- Flexible enough to change based on your financial status
- Covered unsecured debts are cleared once the plan fully concludes
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What debts are covered by a DMP?
Only unsecured arrears and debts may usually be included in a DMP. Unsecured debts are not guaranteed by any owned asset. Examples of unsecured debts include bank overdrafts, store cards, personal loans, and credit cards. Mortgages and some types of automobile loans are considered secured debts because an owned asset is used to guarantee them.
If I am a homeowner, will I qualify?
A DMP may be the best solution for you, regardless of whether you live with parents, rent, or own a home.
Will creditor letters and phone calls continue while a DMP is in place?
As an informal arrangement, a DMP is not binding from a legal standpoint. Therefore, you will probably continue to receive some amount of creditor letters and telephone calls. However, this correspondence typically becomes much less frequent after the DMP is established and you are submitting regular debt payments.
Why have I received a Default Notice if I am in a DMP?
A DMP usually places you in default of your original credit agreements with covered creditors. Therefore, they are entitled to legally protect themselves by providing you with a Default Notice. While issuing a Default Notice “opens the door” to legal debt recovery action or a debt sale, it’s no guarantee that this will happen.
Must I reveal my DMP to my partner?
It is usually best to keep your partner informed. We typically find that they’re supportive after the initial shock. However, ultimately it’s your choice whether to share this information with them or not.
How do I verify that creditors are being paid each month?
Creditor statements will continue being sent to you periodically. Inspect these to confirm whether interest and fees are frozen. Verify declining balances for credit accounts by comparing statements monthly. Your debt management plan provider should also issue statements to you periodically, and you’re entitled to request one at any point in time.
Is it a loan? Is a credit check performed?
No, a DMP is not considered a loan and a credit check does not have to be conducted.
Will it affect my credit rating?
Since the full repayments established in creditor contracts will not be made under a DMP, your credit rating will be negatively affected. The debts may already have been reported to credit reference agencies by creditors if you’re in default. As you move towards clearing your debts you’ll have the opportunity to improve your credit rating again in the future.
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May I change the monthly payment established by my DMP?
Since this plan is informal, you may tailor monthly payments to mirror your financial situation, increasing or decreasing payments as needed when things change for you.
Must I change banks or cancel direct debits?
To avoid double payments to DMP creditors, direct debit arrangements with them should be cancelled. However, direct debits for expenses like utility bills and car insurance payments that are not included in the DMP may remain. If your current bank is one of your DMP creditors, switching banks is strongly recommended.
This prevents the covered bank from keeping your wage payments in an attempt to offset your debt.
Does a creditor have to accept an offer of reduced payment?
No, creditors are not required to accept any repayment offers that are less than the minimum contracted amount. However, they often accept such an offer if you can prove that you are serious about debt repayment and the amount is reasonable and fair.
Whether or not they have agreed to the reduced payments on offer, they must receipt any payments that are actually made against your account.