Settling debts on debt management plan


Settling debts on a management plan at a reduced monthly payment will affect your credit history but will avoid you getting into further financial difficulties


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A Debt Management Plan (DMP) is a repayment of your debt at affordable monthly payment calculated on your monthly income and expenditure. You can negotiate with your creditors to reduce your monthly payments at a more manageable level based on your monthly income and expenditure. The Debt Management Plan (DMP) is an informal and is not a legally binding arrangement. The arrangement can be removed by your creditors without prior notice.

Debt Management is to clear debt but at much longer period of time or sooner if possible. Not all creditors will help. Some creditors will continue to add interest and late payments charges to your account. If you own a property it may be possible that the creditor will take legal action to have a second charge on your property. The plan only works when you maintain regular payments and prove to your creditors that you are doing everything possible to clear your debt.

You will be required to provide a financial statement showing your monthly income and expenditure and also all the necessary statements of accounts and invoices you have used to prepare your financial statement to your creditors to show them your current financial situation and your difficulties in maintaining your regular contractual payment.

The figures you need to provide are your weekly/monthly income and your outgoings (expenditure) including your essential cost such as council tax, rent or mortgage, gas, electricity, housekeeping etc. Deducting your income from expenditure is your disposable income. This is the amount you have to pay to your creditors. Please make sure that you provide realistic figures and if necessary be able to back it up with the documents.

There are couples of different ways of making offers to your creditors. Most of the debt management companies offer payments on a pro rata basis. This means that the creditor to whom you owe highest amount gets highest paid and the creditor with the lowest debt gets lowest paid. The alternative is to make arrangement with your creditors to pay highest amount to the account where interest and charges are applied and lowest where possible to accounts where interest and charges are front loaded or suspended.

It is very important to be in contact with your creditors at all times. If your financial situation changes for better or worse, please inform your creditors. This will be in your favour should creditor decide to take legal action.

Read more about Administration Order, Bankruptcy, County Court Judgement, Debt Management, Full & Final Settlement, IVA, Re-Mortgage, Repossession, Secured Loan, Scottish Trust Deeds, Statutory Demand, Unsecured Loan etc.

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