Debt Management Plan Do’s & Don’ts. StepChange Debt Charity (2024)

FAQs

Which debts can t you pay off with a debt management plan? ›

You can aim to include all debts in a debt management plan, but not all debt will qualify. Mortgages and other secured debts are not covered by a debt management plan, but in many cases it makes sense to include all of the debt that qualifies.

Remember that a DMP won't pay off all your debts. Your priority debts, such as mortgage arrears or court fines, can't go into a DMP. You need to make arrangements to pay these debts first and still need to deal with these creditors yourself.

If you're in a debt management plan (DMP), it may have an impact on your credit rating. This could mean you find it more difficult to get credit in the future.

Every participating creditor offers their own rates, but in aggregate, the average interest rate for accounts included on a debt management plan with MMI is below 8%.

A DMP may be a good option if the following apply to you: you can afford your living costs and have a way to deal with any priority debts, but you're struggling to keep up with your credit cards and loans. you'd like someone to deal with your creditors for you. making one set monthly payment will help you to budget.

DMPs and Your Bank Account

You can often continue using your current bank account as normal. However, as specialists in DMPs, we recommend that you change your bank account if you have an overdraft that you have used and are now applying for a DMP.

Debt collectors cannot harass or abuse you. They cannot swear, threaten to illegally harm you or your property, threaten you with illegal actions, or falsely threaten you with actions they do not intend to take.

Filing for Chapter 7 bankruptcy eliminates credit card debt, medical bills and unsecured loans; however, there are some debts that cannot be discharged. Those debts include child support, spousal support obligations, student loans, judgments for damages resulting from drunk driving accidents, and most unpaid taxes.

To cancel your DMP, you need to contact your provider and ask to cancel. They will inform your creditors that the agreement has been cancelled, so you can expect to start dealing with them yourself again.

You'll need to send your debt management plan provider a payment each month, usually by Direct Debit. The DMP provider will then pay your creditors on your behalf according to the terms of the plan. You don't have to worry about contacting your creditors to reduce your payments; this'll be done for you.

Do StepChange need bank statements? ›

If you're receiving benefits we'll also need proof of these (including child benefit). This proof can be your most recent award letter if you received this in the last three months, or bank statements to show the amount, type and frequency of payments.

Yes – creditors are under no obligation to accept your DMP. They might do this if they don't want to accept reduced payments or feel you could afford to pay more. If they refuse to negotiate with your DMP provider, it can be worth negotiating with them yourself. Outline what you can afford to pay each month and why.

The debts associated with your DMP may still stay listed on your credit report until the six-year period is up from when they were added – if they have defaulted or there are CCJs associated with them, for example – but the marker for your DMP will be removed.

Instead, each debt in your DMP is marked as either 'AP' (arrangement to pay) or 'defaulted'. A debt with an AP marker stays on your credit report for six years from the date it is settled and a defaulted debt for six years from the first recorded default.

The accounts you are repaying your DMP through will already be listed on your credit report, and once the DMP is complete the marker will be removed and the accounts themselves will be marked as closed – they will then remain listed for six years from the settled date.