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

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Scott
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Scott Nelson

Managing Director

MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.

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Janine
Janine Marsh Profile Picture

Janine Marsh

Financial Expert

Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.

Learn more about Janine
· Jan 21st, 2024
Could you legally write off some debt? Answer below to get started.

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For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

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should i tell creditors i am getting a debt management plan

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

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. 

Could you legally write off some debt?

There are several debt solutions in the UK, choosing the right one for you could write off some of your unaffordable debt, but the wrong one may be expensive and drawn out.

Answer below to get started.

How much debt do you have?

This isn’t a full fact find. MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

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. 

» TAKE ACTION NOW: Fill out the short debt form

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

How a debt solution could help

Some debt solutions can:

  1. Stop nasty calls from creditors
  2. Freeze interest and charges
  3. Reduce your monthly payments

A few debt solutions can even result in writing off some of your debt.

Here’s an example:


Situation

Monthly income £2,504
Monthly expenses £2,345
Total debt £32,049

Monthly debt repayments

Before £587
After £158

£429 reduction in monthly payments

If you want to learn what debt solutions are available to you, click the button below to get started.

Get started

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. 

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”. 

Thousands have already tackled their debt

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I’d recommend this firm to anyone struggling with debt – my mind has been put to rest, all is getting sorted.

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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. 

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. 

Could you legally write off some debt?

Answer below to get started.

How much debt do you have?

This isn’t a full fact find. MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

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The authors
Scott Nelson Profile Picture
Author
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh Profile Picture
Debt Expert
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.