Questions On Debt Management Plans (Or DMPs)
Listed below are some of the frequently asked questions on DMPs.
Got debt management questions? At Payplan we're happy to answer all your queries.
Click on a question below to reveal its answer, and if you think you need debt management help then please feel free to call us on 0800 280 2816 or send us a Debt Help Request so we can call you back.
About your DMP
A Debt Management Plan (also known as a DMP) is a debt solution for anyone who has unsecured debts that they can't afford to repay.
If you owe money to more than one creditor and you have a surplus income each month (that is, money left over after you have paid all of your living costs & household bills from your income) then a DMP could be a great debt solution for you.
With a DMP, you pay all of your unsecured debts back, but at a more affordable rate.
- You pay one monthly payment to Payplan who distribute all of your DMP payment on a pro-rata basis to your creditors.
- Unlike most other debt management companies, Payplan don't charge you any fees for a Debt Management Plan.
- Once you enter a DMP, your creditors sometimes agree to freeze your interest and charges for the term of the DMP, so the debt doesn't increase any further.
- With a DMP you only pay what you can afford, based on your incomings and outgoings.
- You will no longer need to negotiate with your creditors alone and, whenever required, Payplan will advise and assist you with communication you receive from your creditors.
- With Payplan you can track your Debt Management Plan's monthly payments online using our exclusive free PayplanPlus website.
- Whilst creditors may still write and call you, we at Payplan encourage them to contact us instead, and this can often reduce the number of calls and letters you receive (if you get any communication while in a Payplan Debt Management Plan, just contact your case officer who will advise you what to do).
- A DMP isn't legally binding, so creditors could in theory proceed with court action (although Payplan will assist you with this should it ever occur during your Debt Management Plan).
- If you are only making a small monthly payment and have a high level of debt, it could take several years to clear your debt with a DMP. (Payplan will recommend all alternative solutions if this is the case).
No, a debt management plan is a way for you to repay your debts at an affordable rate.
A debt management company such as Payplan doesn't buy the debt from your original creditors, nor do they give you money to cover your existing debts.
A Payplan DMP helps you to manage your debts by offering a reduced payment to each of your creditors, and we also negotiate to freeze interest and charges to help you get debt-free quicker.
The length of your Debt Management Plan depends on your individual situation.
It depends on your level of debt and how much you can afford to repay each month. If we are able to negotiate a freeze interest and charges with creditors, the length of your Debt Management Plan can be dramatically reduced.
For example: If you owe £25,000 and you can afford to pay £250 per calendar month the DMP will last for just over 8 years (100 months). This applies only if the payments are maintained each month and the creditors freeze interest for the duration of the plan. (Don't forget, your DMP can be completed sooner if your circumstances improve and your payments can be increased).
About your DMP payments
Nothing if you choose Payplan, it's completely free.
As you may know there are many debt management companies that charge by either requiring a start up fee or a monthly management fee, which can be anything from 15% - 17% of the monthly payment.
Many creditors recognise our success at arranging debt repayment solutions that our clients can afford to repay, and agree to a small donation to us for providing this service to you.
This is what allows us to offer completely free Debt Management Plans. So whatever you can afford to pay each month goes directly to your creditors to reduce your level of debt even quicker.
For example if you can afford to repay £250p/m all of that money will be distributed to your creditors pro rata, Payplan takes no fees from your payment and the full £250 per month will go towards paying your creditors off.
Please think very carefully before signing up with a fee-charging company, because Payplan can offer this service for free!
This depends on two things; your surplus income (i.e. the money you have left over every month after paying all your living expenses), and how much you owe each creditor.
|Creditor||Amount (% of total debt)|
|Credit Card||£1,525.32 (18%)|
|Store Card||£1,779.54 (21%)|
|Bank Loan||£5,169.14 (61%)|
|Creditor||Amount (% of total debt)|
|Credit Card||£27.54/month (18%)|
|Store Card||£32.13/month (21%)|
|Bank Loan||£93.33/month (61%)|
We will pay the agreed amount each month to each of your creditors, on your behalf, with no fees taken out.
During the term of your DMP you can pay either weekly or monthly using one of two methods:
- Standing Order (this is the easiest and preferred method)
A Debt Management Plan is an informal arrangement between you and your creditors, so you are free to stop the DMP at any time, but we ask that you provide as much notice as possible so we can inform all of your creditors.
If you are experiencing further financial problems and cannot afford the current DMP payments to Payplan, please let us know because we may be able to restructure the Debt Management Plan for you.
Please note: Bear in mind that once the DMP is cancelled, creditors may well resume interest and charges.
About your creditors
One of the benefits of a DMP through Payplan is that we will contact your creditors, explain your situation, show them your income and expenditure and make an offer of payment to them. Using Payplan for a Debt Management Plan helps to alleviate the stress involved for you.
Creditors don't actually have to agree to the Debt Management Plan payments in order for you to send them the money. You can only offer what you can afford and no more; the creditors know this but may use commonly-used techniques to try and get you to increase your payment.
Due to the excellent reputation in the credit industry that Payplan have built over the last 20 years, many creditors will accept our DMP offers, as they know our reputation and we propose Debt Management Plans that are affordable, sustainable and can really help people get debt-free.
A DMP in itself will not show on your credit file, however, if you have recently been experiencing financial difficulty (missed repayments) then your credit rating is likely to have been affected already by this.
To explain this further; whenever the full contractual payment isn't made, whether this is through a DMP or not and even if the payment is just a few pounds short, it will still affect your credit rating because, if your Debt Management Plan repayment is less than the required repayment as originally agreed, then you are not complying with the original credit agreement you made.
Payplan can help clear your debt quicker by negotiating for interest & charges to be frozen during the term of your DMP, so your credit rating may be affected but it will be affected for a shorter period than if interest and charges weren't frozen.
Unfortunately, due to a Debt Management Plan being an informal arrangement, your creditors are still entitled to contact you directly, so Payplan cannot guarantee that all letters and phone calls will stop immediately, but we can hope to reduce communication to a minimum.
If you do receive any correspondence from your creditors that concerns you while you're in a Payplan DMP, simply contact your DMP case officer who will be more than happy to provide you with further information and will, if necessary, speak to your creditors on your behalf.
We will speak to all your unsecured creditors whenever we need to. This is one of the major benefits of being a Payplan client.
Payplan have an exclusive website for tracking your Debt Management Plan payments called PayplanPlus. This website is exclusive and free to all our clients, and allows you to view the DMP payments we have received from you. You will also be able to track individual payments to each of your creditors and confirm exact dates. Once you enter into a Payplan DMP arrangement your personal case officer will give you your own unique login details so you are able to track your DMP payments.
Creditors may occasionally contact you to say that they haven't received a payment from Payplan, which is often untrue; they may be asking you for more money directly, or there may even be a misunderstanding between departments. If you ever suspect your creditors aren't being paid or that a mistake has been made during the term of your Debt Management Plan, then you should get in touch with your DMP case officer via their direct line or by contacting Payplan online.
About legal issues
A Debt Management Plan isn't legally binding so creditors could feasibly still take action against you. But as Payplan have many years’ experience in arranging and managing DMPs, and as we have a very good and well established relationship with creditors, this is less likely to happen if you keep to your Debt Management Plan. Plus, even if a creditor applied to the court for a CCJ, then the resulting payment should remain similar to what you are already paying through your Payplan Debt Management Plan.
If any of your creditors were to apply to the court for a CCJ, then of course Payplan would continue to support you.
By entering a DMP, your creditors can issue a default notice as you are defaulting on your original credit agreement. That is, although you are making monthly repayments, the payment is likely to be less than you originally agreed to pay when you entered the original credit agreement.
If you receive a default notice, it doesn't automatically mean the creditor is going to take legal action. The default will appear on your credit file for 6 years from the date it was issued.
If you have any doubts or queries about default notices, then please contact us and we’ll explain everything in detail.
CCJs don't prevent you from entering into a Debt Management Plan.
Payplan will help you make the payments to creditors who have issued you with a CCJ. You will be required to provide details of your CCJ during the financial assessment we undertake as a normal part of your Debt Management Plan, and CCJ payments will be given priority when Payplan distribute your payments monthly.
Other popular questions people ask
At Payplan we pride ourselves on giving excellent support to all our clients. Throughout your Payplan Debt Management Plan arrangement you will have a DMP case officer who will give you a direct number and an email address so you can keep in contact.
If your financial situation changes, you can talk to your DMP case officer who will assess your circumstances and, where appropriate, try and arrange a new Debt Management Plan for you.
Our members of staff are always there to give support and answer any questions you may have about Debt Management Plans or any other more appropriate debt solutions.
And all for free!
As responsible financial advisers, we ask clients not to obtain further credit whilst in a Debt Management Plan. It can be considered fraudulent to take out credit that you know can't be repaid. The Debt Management Plan that you discuss with Payplan will ensure you have enough money to live on, so you shouldn't need to take out any more credit during your DMP. There are of course exceptions; for example you might have a company credit card where you are not liable for the repayments, but you should still declare these to your DMP case officer to avoid any problems.
No debt management company (even Payplan) can guarantee that creditors will freeze interest and charges during your Debt Management Plan (DMP), and you should be wary of those who say they can.
We feel your best chance of achieving such a freeze is by presenting a realistic income and expenditure report to your creditors, as we would on your behalf before you begin a DMP with Payplan.
Creditors are likely to be more co-operative when they see that you are making every effort to clear your outstanding debts with a reputable company like Payplan.
Your secured debts (i.e. mortgage and car hire purchase) can't be included in a Debt Management Plan; only unsecured debts can be included in a DMP. If you are unable to make the contractual payments to your secured debts you are at risk of losing the item to which the loan is secured on (e.g. the house if you default on the mortgage or the car if you default on the HP agreement).
Payplan will ensure you include your secured debt repayments in your income and expenditure budget right from the start. This should mean you never get into arrears with your secured debts, and Payplan strive to help you budget sensibly when you are in a DMP. This site offers further information on Mortgage Arrears, Car Repossession, and House Repossession.
No, a Debt Management Plan is an alternative to bankruptcy and isn't legally binding so you won't lose your home if you continue to make the agreed payments into your DMP.
It is always our priority at Payplan to ensure that your property is not at risk and allowances will be made within your income and expenditure to keep up the payments on any mortgages or loans secured on your property. Providing you do this then there is no reason why your property should be at risk.
A DMP will only help you make reduced payments to your unsecured creditors, therefore the debts that can be included are:
- Personal loans (loans taken to purchase cars are fine but Hire Purchase (HP) agreements cannot be included as they are secured against the item being purchased)
- Credit cards
- Store cards
Secured debts can't be included in DMPs because any payments on secured debts that aren't met in full, can lead to the goods being repossessed. This website provides details on house repossession and car repossession, which are all consequences of not maintaining mortgage or hire purchase payments.
We offer an absolutely confidential service from start to finish, so Payplan will never force you to tell your partner about your debt situation, although support is available if you wish to tell them.
Whenever we contact a client we take great care to avoid divulging the nature of our call to anyone but the client.
To enter into and maintain a successful Debt Management Plan you will need to live within a budget, however this is discussed with you openly. Payplan are required to submit your income and expenditure details to your creditors.
Remember that when we're negotiating your DMP, it is in your interest if we can show your creditors you are prepared to make some sacrifices to help repay your debts.
If you have a current account with a company you owe money to, you will be required to open a new bank account. This is not only the case with a DMP but you should change your bank account if you are going to make reduced payments to a company that you also bank with. Banks have the “Right to Offset” so any money in your current account could be used to pay another debt with the bank. We wouldn't account for that in your Debt Management Plan so it would make sense for you to switch to a new current account.
More Information on Debt Management
- Debt Management Plans
- How to get started with Payplan
- Debt Management case studies
- Debt Management Fee Chargers
- Compare Debt Management Companies
Are you ready to let us help with your debts?
A Payplan Debt Management Plan is free of charge, and so is our debt advice.
If you think you're ready for a practical debt solution that will help you clear your debts, call us now on 0800 280 2816 and we’ll be more than happy to give you great advice that is tailored to your circumstances and needs.
Naturally our advisers sometimes get very busy taking calls, so if you can’t get through at first please do try calling again, or simply send us a Debt Help Request so we can call you back.