Over 1,000 people are now using North East Derbyshire CAB’s (NEDCAB) award-winning debt advice website to run their own Debt Management Plans (DMPs). Since its launch in 2102, the NEDCAB system has now grown into a comprehensive on-line resource, helping users find the best debt solutions for them and with pages of information e.g. how to complete bankruptcy forms. NEDCAB use the system in their own bureau and also in places like local libraries, where they have set up iPad information kiosks.
CABmoney – a nationwide system
In 2014, the NEDCAB system has been expanded so that it can be used by other CABs and has become the CABmoney system. Last week it was announced that Cornwall CAB has adopted it, joining Central and East Northamptonshire CAB, Citizens Advice County Durham and Derbyshire Districts CAB. Other local CABs are looking into using the system.
You don’t have to live in one of the areas where the local CAB has signed up to the system to use CABmoney:
- the information areas of the websites are accessible to anyone without signing up.
- to set up your own self-administered DMP, you sign up with a user name and password so that your debt details can be stored and retrieved later (Names and addresses are not saved as a security measure.)
How self-administered DMPs work
In a DMP, you pay less than the normal amount each month to your debts – the amount you can afford is divided between your creditors who are asked to freeze interest and not add extra charges on. DMPs have advantages and disadvantages – even though getting the interest on your debts frozen may sound great, if it will take too long to clear your debts, then there may be a better debt solution for you.
DMPs are often set up through firms, where you make one single payment each month to the firm which divides it between your creditors. If you set up your own DMP, you write to each creditor offering them their pro-rata share and ask them to freeze interest. CABmoney assists you to do this by:
- letting you look up creditors or debt collection agencies and automatically import their addresses;
- helping you to create a budget, converting weekly amounts to monthly, and warning you when amounts look lower or higher than normal;
- generating a Financial Statement for you, in a format that creditors will accept;
- calculating the pro-rata sharing of your surplus money between your creditors – these may be token offers of £1 or £5 a month if your surplus is low;
- generating the letters to your creditors; and
- letting you record creditors replies.
You can get an overview of how this works by looking at the sample CABmoney DMP here.
As you will be making the same payments each month for a while, it’s a good idea to automate these by setting them up as Standing Orders.
The advantages of running your own DMP
Some people have to run their own DMP, as most DMP firms require you to have at least £50 a month to pay to your creditors. But even if you could use a firm, many people like self-administered DMPs for a variety of reasons including:
- you want to feel in control of the process, knowing exactly which creditors have agreed to accept the offer and freeze interest;
- you prefer not to discuss your budget with a DMP firm. If your budget changes, you just tell your creditors, no need to ‘ask permission’ from the DMP firm for a change;
- it will give your more flexibility over what you do if you get a lump sum, say from a PPI refund, where you might want to make full and final settlement offers to a couple of your creditors rather than spread the sum between all of them.
If you are already signed up with a commercial DMP firm that is charging you fees, you can switch to the CABmoney system and it will generate the necessary creditor letters. When all your money is going to your creditors, rather than a DMP company, you will get out of debt sooner.
Will my creditors really take my letters seriously?
Yes they should. The CABmoney service generates your letters in a format that your lenders will be used to, with a Financial Statement containing the information lenders need.
I think I would rather use a firm
Running your own DMP doesn’t appeal to everyone. If you want to use a firm to manage your DMP and deal with your creditors, make sure that the DMP provider you choose is a charity that doesn’t charge you any fees.