Unlike an Individual Voluntary Arrangement and other legal-based debt solutions, a debt management plan is not legally binding. As such, you are entitled to cancel your agreement with your creditors whenever you like if you believe that it is not benefitting your situation. However, you should keep in mind that your creditors will most likely start aggressively pursuing you for the repayment of your outstanding debt if you cancel your arrangement, and you might not receive any refund for the payments you have made to a debt management plan provider up until the point of termination.
The following page will elaborate on the potential ramifications you should consider before cancelling your debt management plan arrangement and which measures you will need to take if you decide that there is a superior solution to your financial difficulties.
Can I cancel my debt management plan?
Because a debt management plan is not a legal-based debt solution, and no parties are legally bound to the arrangements terms and conditions, either are entitled to cancel the debt management plan after it has been set up. There is a multitude of circumstantial reasons why you may decide to terminate your debt management plan agreement, including:
- Your creditors accepted your debt management plan proposal but did not freeze interest and late charges on your outstanding balance, resulting in a substantiation of your financial difficulties
- Your debt management plan provider is charging excessively high monthly fees which are being taken out of your monthly debt management plan payments.
- Your financial situation has worsened whilst on a debt management plan and you can no longer afford to pay your priority debts each month.
- You believe that your provider has mistreated you or has serviced you unsatisfactorily.
- You have come into a lump sum of money, either through the lottery or some form of inheritance, and are now in a superior financial position to pay back your debt quicker.
Should I cancel my debt management plan?
Prior to making the final decision about whether to cancel your debt management plan arrangement, it is imperative that you consider the following areas and make sure you are fully aware of the potential repercussions of doing so.
How do you plan to address your financial problems now?
Before you decide to terminate your debt management plan agreement, it is vital that you consider the way in which you will address your debt after it is no longer in place. Remember, whenever you cancel your arrangement, your creditors will begin pursuing you again for the repayment of the money you owe them, and will start adding late and interest charges to your balance if you had these ceased whilst on the debt management plan. You will also have to go back to making your initial loan repayments again, and you will have to adjust your finance accordingly in order to make sure you have enough money to meet these.
It is imperative that you consider how you will manage your debt now that your no longer have a debt management plan, and map out a clear plan of action to deal with your creditors.
It might also be worth looking at alternative debt solutions which could potentially benefit your situation and discuss them with a financial advisor. They can then let you know whether they believe a different solution would be better for you or whether a debt management plan is the best suited measure to your circumstances.
Will you be given a refund for the fees you have paid to your provider?
Your original contractual arrangement should clearly specify whether you are en titled to receive a refund for any fees you have paid in the event that you decide to cancel your debt management plan prematurely. If you have decided to stop using a debt management plan, then you will need to evaluate your original contractual document in order to ascertain whether you are applicable to receive a refund or not.
If you were sold a debt management plan online or via telephone, then your acquisition will be classified as a distance sale and you will be in a stronger position when it comes to cancelling than if you actively sought out the services of a provider. Usually, you will be given 30 days after you set up a debt management plan to cancel it and receive a full refund.
Will you need to pay any party for cancelling?
Your presiding debt management plan firm should have clearly outlined whether you will have to pay a fee for cancelling your agreement prematurely right from the outset of setting it up.
Are you cancelling because you believe your provider mis-sold your debt management plan to you?
If you are cancelling your debt management plan because you believe you were given misleading or false information by the provider when they sold it to you, then you are fully entitled to make a complaint to the Financial Conduct Authority (FCA) citing a breakage of their regulations. In cases such as these you will be able to cancel your agreement and pursue a refund simultaneously.
How do I cancel my debt management plan?
In order to cancel your debt management plan, you will need to get into contact with your creditors directly and alert them of you desire to bring your agreement to an end. They will then officially confirm the cancellation of your debt management plan, and you will be expected to make the same monthly payments to your creditors as you did before you set up it up.
Alternatively, if you have used the services of a debt management plan firm to interact with your creditors, then you’ll have to get into contact with your presiding firm and make a formal request to terminate your deal. They will then alert all of your creditors about the cancellation of your debt management plan and you will have to start interacting with them personally again.