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Should I Tell Creditors I am Getting a Debt Management Plan?

should i tell creditors i am getting a debt management plan

A debt management plan is an extremely flexible solution but many people get confused about how creditors should be dealt with in it. 

The fact that many creditors reject the idea of a debt management plan beforehand and refuse to negotiate terms doesn’t help things either. 

In this post, I’ll be looking at how you can effectively deal with your creditors during your debt management plan to ensure it’s a success. 

Do My Creditors Need to Know About My Debt Management Plan? 

Yes. Informing your creditors about your debt management plan is essential since they are the ones that are going to assess the terms and approve the debt solution. 

Your debt management plan cannot be put into place if your creditors that are going to be involved in the debt solution don’t approve of it. 

That being said, normally, you’re not the one who will be responsible for informing your creditors about your debt management plan. 

This is usually done by your debt management plan provider. Your debt management plan provider could be a debt management company or an individual. In any case, they are the ones responsible for communicating between you and your creditors. 

Once you have drafted a payment offer for your debt management plan, your debt management plan provider will present this offer to your creditors in a meeting. 

Depending on whether they think the payment offer is reasonable or not, they will either accept or reject your offer. If the offer is approved, your debt management plan is put in place. 


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Are My Creditors Allowed to Contact Me During a DMP? 

Creditors are usually expected to keep contact with debtors to a minimum as long as the debtors are making their payments on time. 

That being said, debt management plans (DMPs) are not legally binding. This means that while creditors are not expected to contact you, they are not obligated to do so. 

As a result, you might still get contacted by your creditor(s) even though they have agreed to a DMP with you. 

Some reasons why a creditor of yours may be contacting you is: 

Regular Account Statements 

According to the Consumer Credit Act 1974, your creditors are obligated to keep sending you annual statements along with default notices in a pre-defined format. 

It happens during a DMP and there’s no need to panic if you receive such a letter from your creditor(s) when you’re in a DMP. 

That being said, it’s important that you read the letters thoroughly and avoid just skimming through them. 

You may find that your creditors may be threatening court action against you. In such a case, you’re going to need to contact your DMP provider for debt advice. 

You can also get debt advice from an independent charity such as Stepchange or Payplan

If You Just Got Your DMP

If your creditor(s) have just agreed to your debt management plan (DMP) and the date hasn’t arrived for you to make your monthly payment yet, then there’s a chance your creditor(s) may still send you reminders. 

In such a case, you should tell your creditor(s) that you’re going to be paying your DMP payment on time and in full and that they should stop contacting you regarding payments. 

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They’re Contacting You About Debts Not in Your DMP 

It’s important to note that a DMP is an informal solution that does not cover all types of debts. For example, priority debts such as mortgage payments, rent arrears, etc. will not be covered in your DMP. 

As a result of this, you’ll still have to deal with those creditors separate from your DMP.

In most cases, the debts that you’re going to have to deal with separately from your DMP will be priority debts. This means that they need to be taken care of before you attend to your monthly payments towards your DMP. 

When it comes to your DMP, payments to priority debts will be considered as “essential living costs”. 

The Creditor Does not Want to Enter into a DMP With You 

There can be times when a creditor could object to you turning towards a debt management plan. As a result of this, they may refuse entering into a DMP with you.

There may be several different reasons for this. Some creditors don’t want to accept reduced payments and feel that they’ll be able to get you to pay the original amount if they don’t enter into a DMP. 

Other creditors might object towards you using a DMP provider that charges their own fees. This is because this would mean that you would have less money to pay towards them.

Another reason why creditors might not accept your DMP is because they don’t want to freeze interest and charges. While it’s true that it’s not obligatory for creditors to freeze interest and charges when entering a DMP, they are often encouraged to do so. 

If a creditor has refused to enter into a DMP with you, then they’re going to be contacting you separately and you will have to make payments towards them separately as well. 


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What Should I Do If I’m Being Harassed by a Creditor? 

While it’s true that there’s no legal obligation for creditors to not contact you during a DMP, they’re often encouraged to keep contact with you to a minimum. This is especially true if you’ve been making your DMP payment as usual every month. 

If you feel that a creditor is harassing you such as by threatening you, contacting you too often or at irregular hours, etc. then it’s important that you seek debt advice. 

Contacting your DMP provider for advice regarding this can prove to be quite helpful. 

Conclusion 

Creditors play a very important role in the success of your DMP which is why it’s important to keep them in the loop when it comes to your plan.

That being said, dealing with them isn’t your responsibility. It’s something that your DMP provider will do for you. 

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