A few readers have asked recently about long term debt payment arrangements. What information do they have to give to a debt collector? Can they can be asked to pay more? etc. Let’s look at three different cases:
- an arrangement with a creditor;
- what happens if you use a DMP firm; and
- what if the payment is to a CCJ.
Arrangement with a creditor
Mr A asks: I have had an arrangement with a debt collector for a number of years. I pay £10 month by direct debit so it’s never late. They have begun sending letters asking me to resubmit my income/expenditure. Do I have to do this? Can they do anything if I do not give them this information and just continue with my current payments?
Everyone was happy when the arrangement was set up. Mr A was relieved this debt was “sorted” in a way he could afford. The creditor was getting some money and knew Mr A was paying a fair amount.
A few years later, Mr A is still happy, he doesn’t mind paying this for many more years. But now the creditor is wondering if Mr A can pay more.
This may feel unfair – you have kept your side of the bargain, why does the debt collector want to change it? But this sort of arrangement is not a formal long term contract. It is just a temporary agreement with the creditor to accept less than the original contract said because you were in financial difficulty.
You don’t have to send them a new Income & Expenditure (I&E) form, they can’t make you. But if you don’t, they may think you have more money … in which case they may decide to start adding interest again or take you to court for a CCJ.
So it’s better to give them your I&E details. It’s worth thinking about what your expenses actually are – it’s easy to miss off things if you don’t budget in detail. Using an online tool such as StepChange’s Debt Remedy can help you to get a full list.
DMP firm wants a review
Mrs B asks I’ve been in debt management for three years and it will go on for a lot longer. My DMP firm is saying if I don’t contact them for a review they will end my plan. What would happen then? Do I need a new DMP with someone else? I can’t afford to pay any more as I have had another child.
Some people prefer to use a DMP firm as it means making only one payment per month and not having to deal with their creditors directly. But a debt management plan run by a DMP firm is essentially a series of debt arrangements made with creditors.
In a DMP a creditor won’t usually ask you to send them a new I&E. If one does, just send the letter to your DMP firm and they will deal with it!
However your DMP should do an annual review with you, including doing an updated I&E, and then send an update to your creditors. This review isn’t just check to see if you can pay more – it will also look at whether a DMP is still a good debt solution for you. Sometimes people start DMPs hoping their situation will change in a few years and they can then repay the debts faster. But if things haven’t improved, it’s a good idea to look at your other options. This may be the case for Mrs B.
If you don’t talk to your DMP firm about a review, in the end they may say they can’t run your DMP any more. In that case you will have to talk to your creditors again and make an arrangement with each of them. You could talk to a different DMP firm, but the FCA, which regulates DMP firms, wrote them all in December 2016 reminding them that had to do annual reviews – so switching firms probably won’t help.
CCJ creditor wants you to pay more
Ms C asks I have been paying £25 a month to a credit card CCJ for a few years but now I have been asked to send in details of my expenses and income. Is this legal?
This comes as a surprise to people. After the court has set what you should pay each month, why is a creditor asking for higher payments? The answer again, as for debt management, is that the payments were set at a level that was right for your circumstances at the time, but the creditor is hoping you are now better off.
So it is legal to ask. If you refuse, the creditor can go back to court and ask for a variation to the order. Or if you have a house, the creditor could decide to go for a charge over your house.
If you have missed some payments, the creditor can also apply to the court to enforce the judgment. This could involve bailiffs or by getting money deducted from your wages (called an “Attachment of Earnings”.)
Any other options?
The answer for all these situations was pretty much the same. An occasional check from a creditor or an annual review with your DMP firm is normal. If you don’t supply the information about your current situation, the creditor may take further action or your DMP may end.
As a very broad generalisation:
- if you can afford to pay more, it’s good to start doing this to get the debt repaid sooner;
- if you can’t afford to pay more, or are struggling already, it’s good to look at your full situation, not just an individual debt;
- if you have had a windfall (bonus? payday loan refund? PPI refund?) or a family member could help you, think about offering a full and final settlement.
But your situation may be complicated. A few examples: retiring in the next few years; family getting bigger or smaller; an interest only mortgage; need to move or remortgage soon etc. These sort of issues don’t show up in an Income & Expenditure sheet – that is just a snapshot of where you are right now. So:
- if you are in a DMP, talk to your DMP firm about a broad review of your situation and how it will be changing;
- if you aren’t in a DMP, try to make time for some long term debt advice – check out my list of good places for debt help. This may not feel important at the moment, but debt problems are usually easier to tackle before they become urgent!