Debt Management Plans; what to do if your situation worsens

Whilst using a debt management plan might make the process of repaying your debt more affordable and less strenuous, you may discover that your total debt rises over the course of using one and you end up paying back more than you included in your plan.

The following page will outline which measures you should take if your financial situation worsens and you are unable to cope with the financial expenditure demands on your income incurred from your total debt rising.

I’ve set up a debt management plan; why is my total debt still rising?

You may have found that your debt has continued to rise despite the fact that you are using a debt management plan. If this scenario is applicable to you then the likelihood is that your creditors have continued to apply interest and late charges to your outstanding balances, even though you are on a debt management plan. This is because this type of debt solution isn’t legally binding and thus there is no necessity for your creditors to freeze all charges on your account after it has been set up.

The only viable method to counteract this other than asking your creditors to stop applying late and interest charges to your debt is to include these additional costs in your monthly debt management plan payments though this might be unaffordable and untenable for those who are already suffering financially.

Can I get my creditors to freeze the interest?

Your presiding debt management plan provider will usually be proactive and start making attempts to convince your creditors to freeze any late or interest fees being applied to your debt whilst they set up your plan. Your provider will let you know whether they have managed to secure this arrangement for you or not before setting your debt management plan up.

It is important to remember that your creditors are under no obligation to freeze interest and late charges on your debt, and you might even find yourself using a debt management plan and still having them applied.

Can I lower my monthly contributions?

As a debt management plan is not a legally binding solution, you can attempt to change the terms and conditions of it throughout its course. If you believe that the amount you are paying each month has become unaffordable due to your situation worsening, then you should contact your debt management plan provider and let them know of your desire to start making smaller payments. The will then negotiate with your creditors to try and ensure this happens, though there is no guarantee that they will be successful with this endeavour.

Cancelling your debt management plan

If you have suddenly lost your job, or have had an unexpected new financial burden placed on you and believe you can no longer afford to make your payments to your provider each month, then you might want to consider cancelling your arrangement with them and considering a different debt solution.

I was mis-sold my debt management plan; what should I do?

Under official Financial Conduct Authority regulations, all debt management plan providers are legally obliged to provide you with clear and comprehensive information about the amount they will take from you each month to cover their fees. They also have to tell you whether they have managed to have late and interest charges frozen on your debt and a failure to do so will constitute a breakage of the rules.

If you believe that your provider failed to do this, and you have witnessed your financial situation deteriorate consequently, then you should make a complaint to the Financial Ombudsman Service and attempt to receive a refund for the fees you have paid thus far.

Loading posts...