Debt Management and free debt advice
Debt Management Plans and Warnings which client should follow
Some DMP providers also give advice, it is important to adhere to it. If they do provide debt advice, this also comes under the FCA rules.
Any advice a DMP provider gives you should be in your best interests (read ”Reason why letter”), including whether or not you are offered a DMP. You must also be informed of the importance of meeting your priority debts, including mortgage, rent and utility payments.
Any advice you’re given must include:
• a realistic assessment of your financial situation with adequate data use
• checking your income, for example by asking to see pay slips
• checking your spending, although standard average figures may be used if appropriate
• a copy of the financial statement which is sent to creditors must also be sent to you
• warning about what could happen if you stop making payments
• an explanation of why your debt may increase if you make payments that are lower than the rate at which interest and charges are building up
• if the plan isn’t producing results that are in your best interest, appropriate alternatives including withdrawing.
Any significant variation in your I/E could jeopardy your household budget and your debt management plan.
If you choose to be on a debt management plan due to high debt volume in your personal name than it is recommended to be aware of certain warnings under FCA CONC rules which are detailed below.
Debt Problems and Solutions -Guidance
What you must know as Debt Solution Client: Warnings (CONC 8.3.4R)
After taking your circumstances into account, it has been recommended that you enter into a Debt Management Plan. Your ‘Reason Why’ letter should explain why this course of action has been recommended. The ‘Reason Why’ letter also describes the advantages and disadvantages of a Debt Management Plan. We would also like you to be aware of the following in relation to Debt Management Plans.
1. You must continue to pay your priority debts such as taxes, fines, child support payments and debts which could result in loss of access to essential goods and services. You should also make pay your rent or mortgage on time. Failure to make these payments could lead to adverse consequences for yourself including being taken to court, loss of essential services such as electricity supply and even your home. These debts are not included in the DMP.
2. You should continue to make payments of due amounts under existing credit or hire agreements. Failure to do this could lead to loss of the good or service for which the credit or hire agreement was taken in the first place. The lender who provided the finance or owner of the good or service supplied could also register a default on your credit file which will be visible for six (6) years
3. Do not ignore correspondence or other contacts from lenders and parties acting on their behalf as you could be missing out on an opportunity to let them know of your circumstances. Be sure to inform them of your situation and your arrangement with ourselves
4. The DMP may show on your credit record as some creditors may request that a note be put on your credit file stating that you are on a DMP. This could make it harder for you to get credit in the future.
5. As you’ll be making lower, more affordable payments, it may take longer to repay your debts on a DMP than if you were to continue to make your contractual payments.
6. Your creditors may not necessarily freeze the interest and charges on your debts, so the amount you owe might not go down as quickly as you think.
7. As a DMP is an informal arrangement, creditors may take action to collect outstanding debts. Creditors typically have legal rights to charge you for the cost of the collection which may increase the value of your outstanding debts to them.
8. Also, a DMP is a non-statutory arrangement which your creditors are under no obligation to accept. Hence, there is no guarantee that any legal or recovery actions currently being undergone by the creditor will be suspended or withdrawn.
9. If your creditors refuse to accept your repayment proposal, or if the arrangement fails, there is the risk of bankruptcy
10. Homeowners may need to release equity from the value of their homes to pay off debts; and that a remortgage may attract higher interest rates or that if no remortgage is available, an individual voluntary arrangement may be extended for 12 months;
11. There are restrictions on the expenditure of a person who enters into an individual voluntary arrangement or protected trust deed;
12. Your lenders may not approve the individual voluntary arrangement or protected trust deed;
13. Only unsecured debts included in the individual voluntary arrangement or protected trust deed may be discharged at the end of the period and unsecured debts not included remain outstanding.
Being in debt can be an isolating experience that can lead to mental health concerns down the road. If you find it difficult to talk to friends and family about your concerns, you may find it helpful to talk to a professional. This could be a charity such as StepChange, or MAS .
You call us on 0203 318 0990 for a free and confidential debt advice, there is no fee for debt consultation. Our team knows exactly what to do to bring your debt problems to a right solution path.
Rajnish Tyagi is an experienced and Cert DR qualified debt advisor at Acme Credit Consultants Ltd, Which specialise in offering suitable debt solutions to clients.
He can be contacted via email on email@example.com