A reader asked:
I’m being told a DMP would take more than 10 years. Is that too long – I hope my situation will improve?
Ten years is a long time. But lots of things can happen during a Debt Management Plan (DMP) which will change the time it may take. Here are seven ways the DMP could be speeded up – not all of them may apply to you.
1. No DMP fees
If the DMP firm you are talking to charges monthly fees, these reduce the amount that goes to your creditors so the DMP takes longer.
Talk to StepChange instead! They don’t charge anything and the DMP is just the same. There are no advantages to paying fees – creditors aren’t more likely to agree to the DMP or to freeze interest.
2. Other commitments end
You may have expenses that you know will reduce or end in the next few years, for example when you become entitled to more free hours childcare.
You may also have priority debts outside your DMP that will be cleared, such as car finance, deductions from benefits, or clearing a tax bill.
Anything like this will allow you to increase your payments to the DMP. so it will finish sooner.
Of course, some new commitments such as a new baby could slow progress in your DMP.
3. Get refunds from affordability complaints
If you have credit cards, catalogues, loans or overdrafts going into your DMP, think about whether you can make affordability complaints. See affordability complaint articles where there is a different article for each type of debt, with a template letter you can use.
Winning an affordability complaint will result in the debt in your DMP being reduced or cleared – so the DMP will end sooner. You can also make complaints about other debts that have been settled in the last few years. There if you win any you will get a cash refund.
Making these complaints isn’t a problem for a DMP.
4. Increasing income
Your income will probably go up over the next few years, but so may your expenses. Sometimes you will feel confident that your income is likely to increase more than your expenses, for example if you are early in your career. This would allow you to increase your DMP payments.
But if your health is poor or you are close to retirement, is it more likely that your income will fall?
5. Partial Settlements
After some time in a DMP, it is likely some or all of your debts will be sold to debt collectors. Debt collectors are far more likely to accept a settlement offer from you than the original lender. So if a relative could offer you some money, or you get a bonus or a refund, or you inherit some money, you could clear £1000 of debt in your DMP for £500 say.
This reduces the debts remaining in the DMP so they will be cleared faster.
6. Creditor unable to produce the CCA agreement
If your DMP has going on for years, and debts have been sold to debt collectors, it may be worth asking the debt collector to produce the CCA agregrrement for a credit card, catalogue or loan. See How and when to ask for the CCA agreement for details. This is more likely to succeed if the account was opened a long while ago or if it has been sold more than once.
If a copy of the CCA agreement can’t be produced by the debt collector, the debt can’t be enforced in court. So you can stop paying and ask for it to be removed from your DMP.
7. Ask for a write off (unusual)
This won’t usually work if your DMP is going well. But if you develop major health problems or there is another reason why you can only make token payments, and this isn’t likely to change, then you may be able to get a debt written off.
Or consider insolvency
But if your DMP is very long because you can only make low payments and none of the above ideas look as though they will make much difference, you should consider if a DMP is the right option for you. Bankruptcy, a DRO or an IVA may be preferable.
Frances says
If your income did increase would it be better to manage creditors outside of a DMP? Would that have a better impact on credit rating or is damage done? I guess charges could such as interest could be put back on? Would a debt recovery company give the debt back to the creditor? I guess what I’m asking is could an increase an income put you back to the original arrangement with a view to increase credit ratings? Or is it not worth it for the sake of improving credit rating and just look to finish the DMP sooner.
Sara (Debt Camel) says
If you get a big increase in the first few months and many of the debts haven’t been defaulted, you could look at ending the DMP and asking the lenders to go back to normal payments. but back interest wont be added and their will be arrears showing on your credit record than you can clear, but will still show historically as being there.
But once defaults have been added or the debts sold to debt collectors, you can’t undo this harm to your credit score. It’s better to just be glad you can clear the debts very fast with a higher income and no interest being added.
The harm caused by defaults to your credit score drops after 2 years, and then again after 4 years. And as the debts are cleared, lenders will be more prepared to lend to you regardless of the credit score.
Frances says
Thank you so much. That’s great. Two of my debts on the plan are also with my mortgage provider which mortgage is up to date but it does worry me when my deal ends if they will say anything. Thanks for your response to my original comment.
Andrew MOORE says
Absolutely agree had a DMP with Stepchange in 2013 and predicted end in 2023 but circumstances changed and all paid off by 2020 and that included getting divorced. The only thing I will say is its hard work and you have to be strict with yourself particularly on your budget but also be realistic.
Sara (Debt Camel) says
Good to hear!
Dave says
Hi Sara,
Been on a DMP with step change for about 5 years now originally owed 50k but now down to 13k. Currently paying £700 a month so as it stands looking at another 18 months to pay it off. I am expecting a bonus early next year to hopefully pay it off early but given what i pay already each month do you think the creditors would likely accept 50% as partial settlments on the remaining balances? or is this even a good idea given i am near the end of my DMP anyway?
All the debts are from credit cards as a result of gambling and have all defaulted some time ago so have been sold on.
Thanks,
Dave
Sara (Debt Camel) says
The 700 a month is affordable?
Dave says
Yes currently on 60k salary.
Sara (Debt Camel) says
In this case your creditors may be unlikely to accept a 50% settlement because they will be paid in full within 18 months. If it is very early next year you could try say 75%? it wont save you much but its more likely to be accepted.