The Top Debt Management Plan Myths Answered

We look at some of the things that you might hear if you are considering a DMP and discover whether there is any truth to them.

DMP's are a very popular way to resolve debt problems. There are no official numbers but it is estimated that tens of thousands of people start DMPs every month.

However with so much information about the different debt management solutions available, trying to decide whether a DMP is the right solution for you is not always easy.

We consider some of the myths surrounding debt management plans and find out whether there is any truth to them.

Contact from creditors will stop

You may think that as soon as you start your debt management plan all the collection letters and phone calls that you have been receiving from your creditors will stop immediately.

Unfortunately this is not the case. It will normally take your creditors two to three months to accept your debt management plan and suspend their collection activities.

Some of your creditors may not accept your DMP proposal at all and will continue chasing you for much longer.

In addition, periodically you may be contacted from any of your creditors with a demand to increase your payment or for financial review. If this happens you will simply have to go through the process of agreeing your monthly payment with that particular creditor once again.

I will get a charging order against my property

DMP do not give you legal protection from your creditors. As such even if you are in a DMP, your creditors are still free to take further action against you to collect their debt if they wish.

This means that if you are using a debt management plan and making your monthly payments on time, your creditors could still apply for a county court judgement against you. They could then apply for a charging order against your property if you are a home owner.

Having said that if you are making regular agreed monthly payments into a DMP it is very unlikely that any of your creditors will take further actions against you. But you need to be aware that it is a possibility.

I can leave out what ever debts I want

A debt management plan is an informal arrangement. As such, there is no legal requirement for you to include all of your debts.

If you want to continue paying a particular creditor or you want to continue using a particular line of credit such as a credit card, it is possible to leave this out of your DMP.

However it is always the best policy to include all of you creditors.

The creditors you do include will expect you to pay all of your disposable income into your debt management plan. If you hold some back to keep paying the debt you leave out of your plan it may mean that the creditors you include are less inclined to agree to the payment offer you have made.

I cannot have a bank account in a DMP

This is certainly not correct. Using a debt management plan means that you remain in control of your finances.

You still need a bank account to receive your income and to maintain your normal payments to your priority debts such as your mortgage or rent, utility bills and other monthly living expenses.

You may have to change your bank account if you owe money to the bank you are currently banking with. However generally this is relatively easy to do and can do done simply before your debt management plan starts.

I have to be in arrears before a DMP can start

This is also not correct. It is true that by the time they start their debt management plans, many people have started to miss payments to their debts and have already fallen into arrears.

However this is not a prerequisite for starting a DMP. You can certainly start a debt management plan if in the past you have never missed a single payment.

Very often you have only been able to achieve this because you have been borrowing from one debt to pay another. This situation has to stop.

If when you calculate your disposable income you simple cannot afford to continue paying your debts without borrowing more, then you are clearly eligible for a debt management plan and your creditors will understand this even if you have paid them on time up until now.

Deciding to start a DMP

Before deciding to start a debt management plan, the most important thing to remember is you need to understand exactly what the plan will mean for you and how you will be affected.

There are other debt solutions available such as an IVA so you must make sure you aware of these and how they differ to debt management plans. You should get advice from a debt management expert.

Then you can be sure that you are making the right decision.