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Frequently Asked Questions Q: What is a debt management plan? A DMP is an informal agreement designed to allow a person who is struggling to meet their monthly debt repayments the opportunity to make a single more affordable monthly payment via a debt management company. In return for a management fee the company passes these payments to the debtors creditors until their debts are cleared. The most important part of the management companies duties should be to negotiate an interest and charges freeze on the debtors outstanding accounts and then regularly ensure that creditors continue this freeze during the term of the DMP. They should also ask creditors not to take any legal or recovery action providing the debtor keeps making their regular payments. Amongst their duties the management company also agrees to handle/reply to creditors letters and enquires.. Q: Is a debt management plan a loan? A debt management plan is not a loan. Q: Will I keep getting letters and phone calls from my creditors? It is highly likely that you will still receive letters and phone calls from your creditors as the agreement reached is informal and therefore not legally binding. However, these letters and calls should become less frequent the longer the plan is in place and the creditors realise they are receiving regular payments. Q: How will I know my creditors are being paid? You will continue to receive statements from your creditors showing the balance on your accounts. This is your opportunity to confirm they have frozen the interest and charges on your accounts. Q: Do creditors always accept reduced payment offers? Creditors do not have to accept any offer of repayment below the contracted minimum. However, they are normally prepared to accept reduced repayment offers where you are able to demonstrate that the offer you are making have is reasonable and that you are committed to repay your debts. Q: Will this affect my credit rating? It is more than likely that the management plan will have an effect on your credit rating as you will not be making your contracted repayments. However, if you are seen to be making regular payments through your plan then this should have a positive effect. You should bear in mind that if you are currently experiencing debt problems it is a possible that one or more of your creditors may have already recorded this information with a credit reference agency such as Equifax or Experian. |
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