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Debt Solutions
Debt Information
- Debt Management FAQ
- Signs of a Debt Problem
- Take Control of a Debt Problem
- Negotiating With Creditors
- Know Your Debts
Debt Management - Frequently Asked Questions
- What is a debt management plan?
- How does debt management affect my credit rating?
- What happens initially when I contact you?
- Is a debt management plan a loan?
- Will I be credit checked?
- Will I keep getting letters and phone calls from my creditors?
- Does a management plan cover all of my debts?
- What is the difference between a secured and unsecured debt?
- Can I pay more or less if I want to change payments?
- How much will my creditors get each month?
- How can I pay into my Plan?
- Do I need to cancel my direct debits?
- Do I need to change banks?
- My reduced payments are less than my interest charges, does this mean I'll be paying forever?
- How do I know I'll be able to maintain the reduced monthly payments?
- How long does the Plan last?
- How will I know my creditors are being paid?
- What happens if my circumstances change?
- Is my home at risk?
- Do I have to tell my partner?
- Will I receive a Default Notice?
1. What is a debt management plan?
A debt management plan is an informal agreement designed to allow a person who is struggling to meet their monthly debt repayments the opportunity to make a single more affordable monthly payment via a debt management company. In return for a management fee the company passes these payments to the debtors creditors until their debts are cleared.
The most important part of the management companies duties should be to negotiate an interest and charges freeze on the debtors outstanding accounts and then regularly ensure that creditors continue this freeze during the term of the debt management plan. They should also ask creditors not to take any legal or recovery action providing the debtor keeps making their regular payments. Amongst their duties the management company also agrees to handle/reply to creditors letters and enquires
2. How does debt management affect my credit rating?
If you already have a debt problem, it is likely that your credit rating has already been affected. If you are unable to meet the original contracted terms of your credit agreement your creditors will register that you are in default. This will be recorded on your credit file and will normally be retained on your file for 6 years.
3. What happens initially when I contact you?
Once you have completed the online contact form, an adviser will contact you and talk to you about your situation and answer any queries that you may have about the Debt Management service and to arrange with you a convenient time for us to call you to go through your financial details.
The time can be arranged whenever it is convenient for you, including weekends or in the evenings if you are unable to do this during the day. The call usually takes no more than 30 minutes and you will be under no obligation to go further should you choose not to.
If at all possible we will ask you to have the following information available:
- Details of ALL of your creditors, including account numbers and recent balances
- Your income and expenditure details
- Details of any county court judgements
- Mortgages and secured loans
- Hire Purchase Agreements and Leases
- Maintenance and CSA payments
4. Is a debt management plan a loan?
A debt management plan is not a loan.
5. Will I be credit checked?
Since a management plan is not a loan you will not have to be credit checked.
6. Will I keep getting letters and phone calls from my creditors?
It is highly likely that you will still receive letters and phone calls from your creditors as the agreement reached is informal and therefore not legally binding. However, these letters and calls should become less frequent the longer the plan is in place and the creditors realise they are receiving regular payments.
7. Does a management plan cover all of my debts?
A management plan can only cover your unsecured debts and arrears.
8. What is the difference between a secured and unsecured debt?
A secured debt is a debt secured against an asset that you own. Typical secured debts will be a mortgage, a secured loan, a car loan, etc. An unsecured loan is any loan not secured on an asset, such as a bank overdraft, a personal loan, a credit card, store card, etc.
9. Can I pay more or less if I want to change payments?
Because the plan is informal you can alter your payments to suit your circumstances. If your circumstances change you can raise or lower your payments
10. How much will my creditors get each month?
This will depend on how much disposable income you have (i.e. the money left over after paying all your living expenses) and how much is owed to each creditor.
For example, let’s say you owe £9,500:
Creditor A £3,650 Creditor B £2,630 Creditor C £3,220 Total £9,500 And that your disposable income is £186 per month. Each of your creditors would receive a pro-rata payment: Creditor A would receive £71.46 each month Creditor B would receive £51.49 each month Creditor C would receive £63.05 each month Total paid to creditors is the full £142 per month because there are no management fees or deductions made for "administration fees".11. How can I pay into my Plan?
Payments can be made either weekly or monthly. There are three methods you can use:
- Cheque
- Standing Order
Remember, until your debt management plan is established you MUST keep paying your creditors what you can afford each month.
It is IMPORTANT that you do not increase your debts at this stage by obtaining further credit or borrowing more money through existing facilities.
12. Do I need to cancel my direct debits?
You should cancel your direct debits to your creditors to avoid the possibility of them being paid twice. However, you should continue to pay your normal household bills, car insurance etc.
13. Do I need to change banks?
If your current bank is one of your creditors the you should change your bank to one that you do not owe any money too. If you fail to do this there is a strong possibility that when your wages are paid into your current bank they will keep your money and offset it against what you owe them.
14. My reduced payments are less than my interest charges, does this mean I'll be paying forever?
Many lenders will freeze interest charges when dealing with fee-free debt managers. This they do because they can see that you are making a genuine effort to pay your debts and are doing so with the assistance of a professional organisation,
15. How do I know I'll be able to maintain the reduced monthly payments?
Any repayment proposal is agreed between you and your debt manager in advance. It is based on the information you have supplied and takes into account all your finances. That is why it is imperative that you include all the information asked for.
16. How long does the Plan last?
That will be determined by how much is owed and the amount you can realistically afford to pay your creditors each month. You’ll be given an indication of the likely length of the plan at the outset, but it will always be dependent on your creditors freezing interest and other charges on your accounts and your circumstances not changing.
17. How will I know my creditors are being paid?
You will continue to receive statements from your creditors showing the balance on your accounts. This is your opportunity to confirm they have frozen the interest and charges on your accounts.
18. What happens if my circumstances change?
If this should happen whilst the plan in place, please let us know immediately. Depending on your situation a revised repayment plan will be negotiated with your creditors.
As a matter of course, we will annually review your plan with you and amend your monthly payment if necessary.
19. Is my home at risk?
If you’ve got a mortgage, allowance for this is made in determining how much you can afford to offer your unsecured creditors through the plan.
This should leave you with enough money to continue making your mortgage payments. Providing you do this, your home should be safe.
20. Do I have to tell my partner?
We believe that it is always best to be honest with your partner. However, you only have to tell your partner if you have shared debts and/or you need your partner's income to be taken into account to support a management plan.
21. Will I receive a Default Notice?
You will be in default on your original credit agreement a creditor is therefore entitled to send you a Default Notice. Creditors send out Default Notices to protect their own legal position and they are often perceived to be worse than they really are.
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