What Happens When a Debt Management Plan Ends?

Are you coming to the end of your Debt Management Plan (DMP) and wondering what happens next? You’re not alone. Each month, over 170,000 people visit our website seeking advice on debt solutions.

We understand that the end of a DMP can bring a mix of relief and worry, and we’re here to help put your mind at ease.

In this article, we’ll cover:

•  What a DMP is and how it works.
•  Steps to take if you miss a payment.
•  How to know when you need to update the terms of your plan.
•  The process of paying off a DMP early and potentially writing off some debt.
•  What life looks like after a DMP.

Our team is made up of people who have experienced debt issues, just like you. We understand your worries and concerns, and we’re committed to helping you explore what happens when a Debt Management Plan ends.

What occurs once the debt solution is completed?

A Debt Management Plan (DMP) normally ends when the debts included in it have been repaid in full. Ask your provider and creditors to confirm the final balances and keep their confirmation.

A DMP does not automatically write off an unpaid balance and it has no fixed six-year expiry. If a creditor agrees to accept less than the full amount, get written confirmation that the payment settles the debt before you pay.

You’ll want to get to improving your credit score and rebuilding your credit file as soon as possible.

Since your credit report is largely dependent on the payments you were making on the DMP, now you’ll be able to get to improving it.

Paying a DMP off early does not immediately remove the payment history for its accounts from your credit report.

A default normally stays on your credit file for six years from its original default date. An account without a default can remain for six years after it is settled or closed.

This can be a nuisance, since lenders may want to look at your credit report and credit rating before they decide to loan you. If DMPs and other debt solutions are listed in your credit history, they may not be as willing to loan to you.

Paying off Early

This section addresses how and when you can pay a debt management plan off early.

In general, you are allowed to increase the payments you make on the arrangement if you can afford to do so.

Two situations that may let you finish sooner are an affordable increase in your monthly payment or access to a lump sum. The actual timescale depends on your balances, payments, interest and any provider fees.

• Your income streams have increased

If this happens, you’ll be expected to contribute more towards your monthly payments.

When you enjoy a spontaneous rise in your income levels, you could be expected to contribute more towards your plan each month than you currently do.

• A big sum of money

If you receive a lump sum during a DMP, ask your provider about paying debts in full or offering settlements. Keep enough money for essential expenses, priority debts and foreseeable costs.

Creditors do not have to accept a reduced settlement. A DMP alone does not entitle you to a write-off because you have paid for a particular number of years.

How to Cancel a Plan?

If you’re looking to cancel your DMPs, you’ll be happy to learn that it’s entirely possible.

In order to cancel your DMP, you need to contact your DMP provider and inform them of your desire to cancel the DMP.

You can ask your DMP provider to cancel your Debt Management Plan using our free letter template.

You can end a DMP, but ending the plan does not cancel the debts. Ask your provider about the cancellation process and arrange how to deal with the remaining balances before stopping payments.

What is a Full and Final settlement offer?

A full and final settlement is one where your creditor agrees to take less than the entire loan amount that is owed to them.

Instead of you having to keep making reduced payments in an attempt to deal with your personal loan or credit card loan, you can have your lenders agree to accept a partial payment.

Then, you’ll be having them agree that they won’t be taking any action to recover whatever remains of the initially agreed-upon amount.

A full and final settlement can be very effective when you’re struggling to pay the full amount towards your plan.

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Life After a DMP

Reduced or missed payments, arrangement markers and defaults recorded during a DMP can affect your ability to obtain credit after the plan ends.

Check your reports with Experian, Equifax and TransUnion. Ask the creditor to correct an incorrect balance, settlement status or default date.

There is no single six-year countdown from the start or end of a DMP. How long information remains depends on how each individual account was reported.

Also, the information may have reached credit reference agencies, which can make it harder for you to find suitable lenders. Your credit file and credit score matter a lot in this regard.

Life after a debt management plan can be rather refreshing, though. You no longer have an active debt solution looming over your head, especially if it’s a debt solution you were struggling with.

After the included debts have been settled, continue paying your current bills and any other commitments on time. Taking new credit is optional, and approval or an immediate score increase is not guaranteed.

All in all, there’s a lot in store for you if you do it right.

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Natasha

Very helpful and informative thank you

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Wrapping it Up

I hope this article helped you get an idea of what a debt free life, one that starts when your debt management plan completes, looks like. 

You will need to make a few lifestyle changes to adapt, but I’m confident you’ll find peace and contentment in your newfound circumstances, such as how you should deal with your lenders and regularly check your credit history.

For personal debt advice, speak to a free debt adviser. MoneyHelper explains DMPs and where to find help.