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A debt management plan (DMP) can be a great solution to tackling mounting non-priority debts, such as credit cards and personal loans. An informal agreement between you and your creditors, it allows you to make affordable monthly repayments for these costs and still have money left over to pay for all your daily living expenses.
A DMP can only be used in the case of non-priority debts. For example, priority debts can include:
Non-priority debts, on the other hand, are for areas which are essential. For example:
Debt management plans are typically set up by DMP providers. When applying for one of these agreements, the provider will arrange a consultation with yourself and discuss your circumstances.
Generally, this conversation will cover such areas as budgeting as well as how much you can afford to pay back each month.
Next, the provider takes the proposal to your creditors. If approved, this individual then manages the plan. This means that – for the course of the DMP – the provider typically handles any interactions with your creditors.
However, a debt management plan is only an informal agreement and, therefore, is not legally binding. Consequently, the plan can be rejected by your creditors – or yourself – at any time.
Although creditors can refuse a debt management plan, it’s worth bearing in mind this is relatively unlikely to happen. After all, assuming the proposal is reasonable and shows clear benefits to them, most creditors will accept a DMP.
Yet, if this occurs, it’s essential to coordinate with your DMP provider. He or she will be able to examine the situation and determine the best way to proceed.
You will only qualify for a DMP if your debts are non-priority issues. As well as this, you’ll usually be eligible for a debt management plan if:
Similar to other financial solutions, a DMP carries a variety of pros and cons. However, there are several benefits which make debt management plans the preferred choice of many:
If you have the funds available to make regular payments each month towards your non-priority debts, then a DMP could be ideal for you. If you want to find out more information, get in touch with one of our friendly advisors and they could assist you in finding your ideal debt solution.
Debt write off applies to unsecured debts and on completion of an IVA. A debt write off amount of between 20% and 80% is realistic, however the debt write off amount for each customer differs depending upon their individual financial circumstances and is subject to the approval of their creditors.
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