DMP case study

Matthew, single, aged 27

Matthew works for an engineering company earning £19,000 a year, and lives in his solely mortgaged property. For the past five years, Matthew subsidised his monthly pay packet by using credit cards and overdrafts, to give him some extra spending money each month. While he hasn’t bought luxury cars or expensive holidays, he has simply been living beyond his means for some time, resulting in the build up of £31,000 of debt across six credit cards.

The monthly credit card payments were manageable for him while he was bringing in a consistent wage, particularly as he was also earning bonuses whilst on-site. Following a knee injury, however, he was forced to take two months off work, resulting in him falling behind with repayments to his credit cards. Following his return to work, Matthew tried to catch up on his arrears, but found that to clear these, he needed to pay £853 per month, which was simply not affordable to him.

As the months went by and Matthew was unable to clear his arrears, the credit card companies continued to add further interest and charges for exceeding his credit limits. Matthew started to feel out of his depth, and decided to approach PayPlan for help.

PayPlan’s expert debt advisors reviewed his situation and identified that a Debt Management Plan would be the best debt solution for him . Having completed his monthly budget to ensure his priority payments could be paid from his wages first, PayPlan identified that he could afford to pay a total of £450 each month.

PayPlan approached the credit card companies and negotiated the terms of a DMP with them. Most of the companies also agreed to freeze the interest that was being charged. Matthew now pays £450 per month by standing order to PayPlan just after he is paid each month. If he keeps up these repayments, Matthew now has a genuine chance of becoming debt-free within six years.

Thinking about a DMP but unsure what’s right for you?

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Table of contents

FAQs

Why do I have to change my bank account?

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.

Will I have to live on a tight budget during my Debt Management Plan (DMP)?

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 stick to a realistic budget to help repay your debts.

Will I have to tell my partner about the Debt Management Plan (DMP)?

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.

A DMP doesn’t usually affect your partner’s credit rating, but if you have a financial association, such as shared debts or guarantor debts, then it could do.

Whenever we contact a client we take great care to avoid divulging the nature of our call to anyone but the client.

Which debts are included in a Debt Management Plan (DMP)?

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
Catalogues
Overdrafts

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.

Is my home at risk if I enter into a Debt Management Plan (DMP)?

A Debt Management Plan is an informal arrangement which is not legally binding and although having a DMP could reduce the chance that the property would be at risk, there is a chance a creditor could take legal action such as securing a charging order on the property. This would secure the debt and a creditor could force the sale of the property at any point during a debt management.

FAQs

Why do I have to change my bank account?

Will I have to live on a tight budget during my Debt Management Plan (DMP)?

Remember that when we’re negotiating your DMP, it is in your interest if we can show your creditors you are prepared to stick to a realistic budget to help repay your debts.

Will I have to tell my partner about the Debt Management Plan (DMP)?

A DMP doesn’t usually affect your partner’s credit rating, but if you have a financial association, such as shared debts or guarantor debts, then it could do.

Whenever we contact a client we take great care to avoid divulging the nature of our call to anyone but the client.

Which debts are included in a Debt Management Plan (DMP)?

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
Catalogues
Overdrafts

Is my home at risk if I enter into a Debt Management Plan (DMP)?

DMP case study

Thinking about a DMP but unsure what’s right for you?

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FAQs

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