Last updated: 23/07/2020 | Estimated Reading Time: 3 minutes
What to do if your situation changes during an active DMP
A debt management plan (DMP) can simplify and reduce the costs of the process of paying back your existing debt.
However, unlike an individual voluntary arrangement, a DMP is not a legally binding agreement. This means that on the one hand, if your financial situation worsens you may be able to reduce your monthly payments but on the other, that your creditors are still within their rights to continue to charge interest on your debts.
We’ll help you work out what to do if either of these apply to you over the course of this guide.
In This Guide:
- Why is my total debt still rising?
- Will my creditors freeze my interest?
- Can I reduce my monthly contributions?
- Cancelling a debt management plan
Why is my total debt still rising?
Since a DMP it is not a legally binding agreement like an individual voluntary arrangement (IVA), you may find that your creditors continue to charge interest or late fees on your existing debts.
This would cause your debt to continue to rise over the course of the DMP, and you could end up having to pay back more than the amount decided upon when the DMP was set up.
The only thing you can really do if this does happen to you is to contact your creditors (either directly or through your DMP provider) and to ask them to freeze any interest charges or late fees but they are under no legal obligation to acquiesce.
Otherwise, you’ll have to simply factor these extra charges into your monthly payment plan or, if this isn’t viable, cancel your DMP and choose a more severe debt solution like an IVA or bankruptcy.
Will my creditors freeze my interest?
Even though they aren’t legally obliged to, you may well find that your creditors will freeze any interest on the debts you owe.
Your DMP provider will be responsible for trying to convince your creditors to freeze their charges and will do so before the DMP is put into place. They’ll then let you know if their attempts have been successful and help you work out the best course of action if not.
Can I reduce my monthly contributions?
The positive upshot of the informal nature of a DMP is that if needs be you are within your rights to change, or at least attempt to change, the terms and conditions of the plan.
So if your financial situation worsens for example, and you find yourself no longer able to afford your monthly payments, then you could petition to reduce them.
If you want to cut down your monthly payments then get in touch with your DMP provider who’ll contact your creditors and try to negotiate a more affordable plan.
Cancelling a debt management plan
If, for any reason, you decide that your debt management plan is unsuitable for your needs or financial capabilities, then are free to cancel it at any time.
To do so, just get in touch with your DMP provider and they’ll guide you through the process.
Bear in mind though that your debts will still remain, and the chances are that if you cancel your DMP, you’ll then need to apply for some form of insolvency like an IVA or bankruptcy.