With our Debt Management Plan, we will undertake an initial review of your finances. This means that we'll discuss with you what income you receive on a regular basis and explore how this income is spent, for example on bills. Having identified what income you have left over (we call this your disposable income) we'll then identify how much you can afford to pay to your creditors.
This is an important step in the process because we will then approach your creditors with payment amounts that are realistic and are at a level that you can afford on a regular basis and are committed to meeting. We call this your monthly payment.
In return we aim to get your creditors to stop adding interest and other charges to your debt.
We will liaise with your creditors and you throughout the process. Once payments arrangements have been agreed, you make your monthly payments to us and we manage these ensuring that they are all passed onto your lenders within 5 business days. For your protection, all payments go directly into our client account so you know that the money can never be used for any other purpose.
A debt management plan is an informal arrangement with your creditors - by that we mean it's a way of agreeing payment amounts with the firms that you owe money to without having to go to court or sign any new credit agreements.
A debt management plan is not a loan or another method of getting more credit. It's about managing the debt you already have with the aim of introducing regular payments that you can stick to.
Ideally, a debt management plan should be seen as a short to medium term solution, particularly if you are struggling with debt at the moment, but expect your financial circumstances to improve at some point.
If interest isn't being added to your account it means the amount you pay to the lender each month is being used to reduce the amount of debt and not repaying interest.
If you are charged 2% interest each month on a credit card and your minimum payment on the card is 3% each month, only 1% of your debt is being repaid. So, if we can successfully stop interest on the account, everything you pay to your lender will reduce the debt.
In simple terms lenders want to be able to get back money that is owed to them. Unfortunately, customers experience a range of changes in their circumstances which mean they can't always afford the expected payment amounts. For a lender, a commitment from a customer to repay a realistic amount each month is better than having to take action through the courts to try and recover the money. Lenders also have a responsibility to deal sympathetically with customers that are in arrears or financial difficulties. Therefore, stopping interest and charges can provide valuable breathing space to customers and help them to get back on track in managing their debt.
As we will have undertaken a full review of your income and outgoings we identify a repayment amount that is realistic. We won't put forward an amount that we think you can't meet on a regular basis. This won't do you, your creditors or us any good at all! We tackle your creditors with reliable information and negotiate arrangements that they can see you are prepared to meet each month. We use our industry knowledge and experience to seek creditors' agreement to this approach.
Well, if you only reduced your payments and the lenders didn't agree to freeze interest and other charges then it would take you longer to repay your debt and cost you more in the long run. We work hard to get agreement from your lenders.
There's no set length of time to a debt management plan - it will all depend on how much you owe and how much you can afford to pay each month.
Once we know how much you can afford to pay, we'll work out how long it will take you to clear your debts and we will tell you this. This is important because this is one of the factors that we will consider when seeing whether a debt management plan is the most appropriate solution for you.
During the first six months of the plan we will retain a flat fee of £45 per month which covers our costs in setting up your plan, including the administrative costs and time involved in sending information to your lenders, negotiating with them on your behalf and confirming arrangements to you.
From month seven onwards, we will charge a fee of £30 and the balance will be sent to creditors. We take this payment as we incur costs each month in calculating and processing your payments to creditors as well as reviewing your plan on a regular basis.
However, if your payment to the plan is less than £100 per month we will reduce these fees so that you will never pay more than 45% of your payment in the first six months and never more than 30% from month 7 onwards.
Take a look at the examples below:
£100 into the plan |
£80 paid into plan | |
|---|---|---|
|
The first six months of the plan |
£45 fee with £55 paid to creditors |
£36 fee with £44 paid to creditors |
|
From month seven onwards |
£30 fee with £70 paid to creditors |
£24 fee with £56 paid to creditors |
Fig. 1 An example of a thing.
If we recommend that a debt management plan is suitable for you, we will confirm everything in writing. This way you have the opportunity to read through the information at your own pace and contact us if you have any questions. You can change your mind within 14 days starting the day after you’ve signed our terms and conditions. You won't have anything to pay. If you've already made your first monthly payment during the cancellation period, we will return it in full less any payments already made to your creditors.
You can even change your mind after this cancellation period. All we ask is that you give us 2 weeks' notice so that we can ensure any payments due to your creditors are made. This also gives us chance to let your creditors know that the plan will end.
You can cancel your plan in the following ways:
By telephoning us on 0800 1223 037
By emailing us at info@moneyrelief.co.uk
By writing to us at:
Money Relief,
57 St Petersgate,
Stockport,
Cheshire,
SK1 1DH
Any money that you pay to us has to be deposited into a special client account. This money can only be used to pay your creditors, pay any amounts owing to you and finally to pay the fee due to us under the plan. The funds held cannot be used for any other purpose.
The client account is totally separate to our business account and has to remain that way.
We can include most debts within your plan but we can't include "priority debts". These are debts or bills that can have serious effects if you don't pay them. By that we mean that you could go to court or risk imprisonment for non-payment, or for other areas, such as a mortgage, rent, and cars bought on hire purchase, you could risk losing your home or your car. If you fail to pay some of your utility bills you could face disconnection.
The main priority debts are shown below and you should always take great care to pay these.
We can take account of any arrears against your priority debts and what's needed to bring these up to date. We will always work out what you have to pay towards your priority debts first and then establish how much you have available to pay your other creditors.
Well, first of all don't ignore them! You can pass any letters onto us and we'll deal with them on your behalf. If you receive a call, tell your creditor that you've arranged a debt management plan with Money Relief and we'll be contacting them to discuss payment arrangements. You can also give them our telephone number if they wish to contact us directly.
Lenders record details of your payment history and provide this information to credit reference agencies. This information is one of the things that lenders may use to decide whether to offer credit. If you've missed several payments and your lender has terminated the relationship then they will usually issue a default notice. Details of missing payments and default notices are usually retained on your credit file for 6 years.
If you're entering into a debt management plan, the chances are your credit rating already shows that you've missed payments or defaulted on your agreement and this may reduce your ability to obtain credit in the future or make it more expensive. Your credit may be affected in other ways, for example some employers and mobile phone operators undertake a credit search as part of their application process.
Your lender could start, or continue with, steps to get back the money you owe, including issuing default notices and potential legal action, which could also add costs to your debt.
You should tell us about any action already started by your creditors as well as any new action that is threatened. Although we can't guarantee to stop them, this information will help us to prioritise which creditors to deal with first.
We are covered by the Financial Ombudsman Service (FOS) which means that if you have a complaint about us and you are not satisfied by the way in which we deal with it, you can refer it to the FOS free of charge.
We always take our responsibilities to our customers seriously. If you are not happy with the service you receive from us then we want to hear about it. Our Complaints procedure tells you how to do this.
We'll review your circumstances every six months to check that the plan is still suitable. If any changes are needed we will discuss these with you and agree any changes before going back to your creditors.
However, if there is a change in your circumstances before then, or at any other time during your plan, that is likely to affect your ability to continue the ongoing payments, we ask that you make us aware.