What to Do if a Creditor Refuses Your DMP

If a creditor refuses your Debt Management Plan (DMP) offer, ask your provider to review the reason and your budget. One refusal does not automatically prevent a DMP from continuing with your other creditors.

In this article, we’ll answer the following questions:

•  Why might creditors say no to my DMP?
•  What can I do if this happens?
•  Can I write off some debt?
•  What if only one creditor says no, but the others say yes?
•  What other options do I have to manage my debt?

Navigating financial difficulties can be challenging, and it’s common to feel unsure about seeking help. In fact, Citizens Advice revealed that 60% of adults facing financial difficulties hesitate to seek assistance.¹

This guide explains the main checks and next steps. A debt adviser can assess your individual circumstances and alternatives.

Can a creditor reject a DMP offer?

A DMP is an informal arrangement, so a creditor does not have to accept the particular proposal. That is different from formal insolvency solutions, which have their own approval rules and can bind creditors.

For regulated consumer-credit debts, FCA rules require firms to consider financial difficulty fairly and prohibit a blanket refusal to negotiate a developing repayment plan.

Provide an accurate income-and-expenditure statement showing what remains after essential living costs and priority payments.

A sustainable offer may be more realistic than the original contractual instalment. Do not offer money needed for rent, food or other essentials simply to obtain agreement.

Ask the creditor to explain any objection so your adviser can address it.

For example, the creditor may need more budget information or clarification about how the payment is shared. A refusal does not prove that you can afford a higher amount.

Some creditors may tell you why they’ve rejected your DMP and some may even suggest changes to the terms of your DMP.

Consider suggested changes with your adviser. Acceptance is not guaranteed, and a payment must remain affordable.

Keep the response and your supporting documents. If a regulated firm handles the proposal unfairly, use its complaints procedure and ask your adviser about escalation to the Financial Ombudsman Service where applicable.

Check whether your DMP provider charges fees and how much reaches creditors.

Free DMP providers are available. Fees reduce the money available for repayment, so compare the full costs before choosing a provider.

This is why when you sit down with your DMP provider, you need to draft a firm proposal that is both affordable to you as well as acceptable to your creditors. 

The payment offer that you present to your creditors will have detailed information about your financial situation such as your monthly income, monthly essential expenditure, assets, and debts.

Keeping this information in mind, you will present your debt management plan to your creditors. 

For debts covered by FCA rules, a lender that has agreed a forbearance repayment arrangement must limit further interest and charges so the balance does not grow while you meet that arrangement.

This does not automatically freeze every charge on every debt when a DMP is proposed. Check each creditor’s response and ask your adviser to challenge inappropriate interest.

What Should I Do If It Happens? 

Ask your provider whether the offer can be clarified, the budget needs updating, or a different solution would be more suitable. You do not necessarily have to abandon the DMP.

Your debt management company with which you were attempting to get a DMP set up may be able to give you debt advice about you should do moving forward. 

It’s important to get debt advice from a professional at this stage, as which debt solution will work for you will depend on many different aspects pertaining to your financial circumstances. 

You may find that a debt relief solution that could be great for you might not be as good for someone else. 

Check that a debt-advice provider has the appropriate authorisation or exemption for its work. For an IVA, check the insolvency practitioner’s licensing as well.

Free debt advice is available from National Debtline, StepChange and Citizens Advice. PayPlan also offers free DMPs, but it is not a charity.

A DMP does not itself stop court action. In England and Wales a creditor may pursue a CCJ; bankruptcy requires separate legal conditions and procedures. Obtain urgent advice about any court papers or statutory demand.

Tell the creditor you are developing a repayment plan and request a hold. FCA rules require a reasonable pause in active recovery where applicable, generally 30 days with possible extension. This is not an indefinite court-action ban.

» TAKE ACTION NOW: Fill out the short debt form

Ask your adviser whether affordable token payments are appropriate while your options are reviewed. Prioritise essentials and any urgent priority debts.

A creditor can receive and credit a payment without agreeing to the proposed repayment arrangement.

Making a payment therefore does not guarantee an interest freeze or prevent legal action. If liability or limitation is disputed, obtain advice before paying or acknowledging the debt.

DMP Comparison

Professional advice may suggest you pursue other debt solutions, such as an IVA, a DRO, or even bankruptcy. 

To help you better understand the main differences between a DMP and other debt solutions, I’ve put together this table.

Get free debt advice to compare options for your country and circumstances. A table cannot confirm suitability.

Take the first step towards tackling your debt

Every day, our partner, The Debt Advice Service, helps people understand their options for dealing with debt. Their debt advice is free, with no obligation to proceed.

MoneyNerd introduces you to The Debt Advice Service. We do not provide debt advice or recommend debt solutions.

Natasha

Very helpful and informative thank you

Get started

If you submit the enquiry form, MoneyNerd will share your details with The Debt Advice Service so they can contact you.

Some debt solutions have fees and may negatively affect your credit rating. MoneyNerd may receive a fee if you go ahead with a debt solution through The Debt Advice Service.

The Debt Advice Service is a trading style of Pacific Financial Solutions Limited.

For free, impartial help and access to not-for-profit debt advice, visit MoneyHelper.

What if One Refuses but the Rest Accepts? 

If a single creditor rejects your payment offer, then you should ask them why it isn’t acceptable to them. 

Your provider can ask the creditor to reconsider using the same realistic budget supplied to the other creditors.

Do not promise that creditor extra money needed for essentials or allocated to others without reviewing the whole plan.

A regulated firm cannot operate a policy of refusing to negotiate a repayment plan. Challenge an unreasonable response through its complaint process.

Your provider can explain whether to continue distributing payments, handle that account separately or review another solution. Check any court response deadlines independently of negotiations.

References

1. StepChange – Credit safety net report