Debt Management Questions - What, Why and How?

1) How much will I have to pay into my debt management programme ?
It depends on your net disposable income which is based on your earnings and expenditure. We work out an affordable monthly or weekly payment, that you can make. It is important to keep up with you regular monthly payments, or your creditors may cancel the agreements we have negotiated on your behalf. Minimum payments are £70 per month or £18 per week.

2) How long will the programme last ?
Usually until all debts have been paid in full. Due to the reduced payment levels, this could be longer than the terms of the original credit agreements and may incur additional interest charged as the term of the credit agreement is extended.

3) How do I know my debts are being paid ?
Once we receive an up to date balance from your creditors which ties in with the latest statements they have rendered we will then start to distribute your monthly payments between them, proportionally, based on how much each is owed. A statement showing how much each creditor will receive will be sent to you for your own records. The agreed payments and distribution proportions remain fixed unless your circumstances change. You will also be sent a quarterly statement showing all transactions on your DMP account with us. Finally, in addition to any documentation you receive from ourselves, your creditors will also send you statements confirming the payments we have made to them on your behalf.

4) Will my creditors/lenders definitely accept your proposed debt management plan ?
Creditors and lenders do not have to accept any Debt Management proposal put to them, but most are willing to if we show it is beneficial to both parties. There is no guarantee existing or threatened proceedings against you will be suspended or withdrawn. Creditors may also continue to issue default notices and add additional costs to your debt. Please be assured that we will try our best to discuss your situation with your creditors and encourage them to freeze interest and charges on your debt.

5) Is this a loan?
No. We neither lend you money nor pay off your debts. Your payment plan is a solution that allows you to repay your creditors at a monthly rate that you can afford. If you do not make payments into the plan, we cannot make payments to your creditors.

6) 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 the plan.

7) How do I know I'm getting the best advice ?
If your circumstances are not best served by a debt management plan we will tell you. We will advise you of the most appropriate options for you whether we make money from this or not. Our advisors who are part of the first group of industry speacialists to qualify and take CertDR (Certificate in Debt Resolution). CertDR is accredited by Edexcel and welcomed by organisations such as the Ministry of Justice, Office of Fair Trading, Insolvency Practitioners Association and the Insolvency Service. The qualification was officially launched by the Debt Resolution Forum in 2009 and created to ensure a consistent standard of high quality customer service, knowledge and ethics within the debt solution industry.

8) What do you charge for this service?
Your first monthly payments and 90% of your second payment is the set up fee. We pay the remaining 10% to your creditors as token payments. After that, our ongoing administration charge is 17.62%. This is included in your monthly payments - not added on.

9) 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 debt is any loan not secured on an asset, such as a bank overdraft, a personal loan, a credit card, store card, etc. Debt Management Plans do not deal with secured debts (other than, sometimes, arears).

10) Will you be dealing with every company I owe money to?
No. Some of your debts may be priority debts due to serious consequences if payments are not made. Examples are your mortgage or utility bills. These will not be included in the DMP but will be taken into consideration when calculating the amount available for you to pay living costs before we distribute the remainder to your other lenders. This will enable you to continue to pay these in full yourself.

11) What if my circumstances change?
Because a Debt Management Plan is an informal arrangement, it is easy to adapt or change if your personal circumstances change. You can replace it with an alternative arrangement (such as an IVA) if that becomes more appropriate at a later date.

12) Will I be credit checked before acceptance?
No. Since we do not lend you any money, we do not need to credit check you.

13) Do I incur any further charges if I cancel my plan?
No, you can cancel with us at any time without any further charge.

14) Will the plan affect my credit rating?
Because coming on plan will result in your not making contracted repayments on your unsecured debts, you should expect that your credit rating will be adversely affected. However, your credit rating may already be poor if you have arrears or a history of missed or late payments.

15) Will I still be able to afford my everyday expenses if I enter into a Debt Management Plan?
Yes – within reason. As part of the process of entering into a Debt Management Plan, we help you identify what is “essential expenditure” – daily and monthly. For example, based on your income, an agreed amount will be proposed to your creditors to enable you to budget for monthly costs of food, mortgage/rent, etc – these are considered essential living expenditure and your creditors do understand that based on your income, a certain amount of money must be put aside for you to still be able to afford these everyday costs.

16) Does it make a difference if I am a homeowner or tenant?
No. It makes no difference whether you are a tenant or homeowner or even if you are still living with your parents.

17) Will I receive a Default Notice?
By coming on plan with us, you will be in default on your original credit agreement and your creditor is therefore entitled to send you a Default Notice. Creditors send out Default Notices to protect their own legal position.

18) At the moment, I am struggling to juggle the number of creditors I have and the number of different payments I owe – how will a Debt Management Plan help me with this?
By entering into a Debt Management Plan with us, we will take one monthly payment from you (after deducting our fees) and distribute it evenly amongst your creditors at a repayment rate agreed with them.

19) Do I have to be in full time employment?
No. To be accepted onto a debt management plan, you only need to have a surplus of income above what you need to live on.

20) Will the plan prevent my creditors taking further recovery action?
We cannot guarantee that your creditors will not take further action, including court action, to recover debts. However, if they do, we will help you respond so that any repayment that is required is within your ability to repay.

21) My bank says they will not deal with you and will take me to court if I use you. What do I do?
A creditor cannot refuse payments from a debt management company and then take you to court for non-payment. Some credit companies may prefer not to deal with us so they can apply more pressure on you, however you have a legal right to allow anyone you wish to deal with your finances.

22) What if my creditors continue to pursue me for payments?
Certainly in the short term, your creditors will continue to take action to recover your debts. Do not ignore them. Deal with calls politely, informing creditors that you have appointed ourselves to act on your behalf. Forward any letters to us and we will deal with these on your behalf.

23) What happens if I come into extra money whilst in a Debt Management Plan, or alternatively have less income because of unexpected circumstances?
One of the benefits of entering into a Debt Management Plan is that it offers flexibility based on your financial situation. Should at any time, your financial circumstances change for the better or worse, you can speak with a member of our team and change your plan accordingly. As long as you can continue to make a minimum payment of £70 a month, a change of circumstances would not jeopardise your Plan. Alternatively, should you come into money and choose to increase your payments, enabling you to repay your debt off sooner, then this can be arranged.

24) My bank (or other creditor) says you have not written to them, but you say you have. Why?
If this happens inform them that we are dealing with your affairs, contact us immediately and we will then issue a further copy of correspondence to them. Employees of a creditor's collections unit have one job, to try to get you to pay money. Unfortunately, some will do this any way they can. Once they acknowledge we are dealing with the account, they know they have to negotiate through us. If they tell you that they have not heard from us then they have more leverage. If they make you think we are not doing our job properly, they will convince you to cancel the agreement with us, and then they can use any tactics they like to extract the money from you.

25) Will I be charged if I change my mind?
You are entitled to ask us for proof of work carried out on your behalf at anytime. We will provide you with a 7 working day “cooling off” period from the date you accept our Terms and Conditions/Terms of Business for Debt Management or, if earlier, from the date your first payment is received. If you decide not to continue with the plan within the first 7 working days, we will refund your initial fee.

26) Will my creditors still charge interest on the debt owed to them?
We can’t guarantee that your creditors will cease charging interest on your debt, but in most cases, they do acknowledge the fact that you’ve chosen to enter into a Debt Management Plan and agree to freeze any further interest. Due to the long standing relationship we have with most creditors, we are able to do this for our clients, but are unable to guarantee this for you.

27) My bank (or other creditor) say they are going to send a bailiff round to collect their money, can they do this?
No. A bailiff can only be instructed and sent by a County Court or Sheriffs office, this means a bailiff can only call if you default on a court order. A debt collector may try to trick you by saying, “if you don’t pay this bill, we could send a bailiff round” this is not true unless you’ve defaulted on an earlier court order. For more information on bailiffs, please read our guide on this subject.

28) Is a Debt Management Plan legally binding and what happens if I want to cancel it?
No – a Debt Management Plan is not legally binding – this means the process to set everything up is much quicker than that of an IVA, and there is no requirement to involve the courts, or high minimum debt or repayment levels. For people who can only afford £70-100 a month repayment, this often is a more manageable way to work towards a debt free future. Should at any time you wish to cancel your Debt Management Plan, you can do this by writing to us and giving us 28 days notice. The notice period starts from the day you write the letter to us, not from the day we receive it.

29) Can I keep one of my credit cards just for emergencies and not count this debt or credit card as part of a debt consolidation programme?
No. If any of your other creditors find out that you are treating another company favourably, they will be more inclined to reject any offers made to them and may look to collect money through court action. All creditors have to be treated equally.

30) How are the fees collected?
We distribute money to your creditors within 5 working days of receiving your monthly payment which has been cleared through your bank account to ours (cleared funds). Every time we make a distribution to your creditors on your behalf, we deduct our fee for that distribution. If we do not make a distribution, we do not take our fee.

31) How is my money held until it is distributed to my creditors?
We hold all monies sent to us for distribution to creditors in a client trust account with our bankers. This means that your money is completely protected, even in the event of our insolvency. No interest accrues on this account.

32) What happens to any money held for distribution if I cancel?
We will refund to you any monies you have paid us which we have not yet distributed at the time you cancel with us.

33) Do I get interest on my payment that I make to you?
Because your payment is only held for a maximum of 14 days before being distributed to your credit companies no interest is paid.