Options if your Debt Management Company goes Bust

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It is possible for a Debt Management Company to stop trading. This may be for financial reasons or because their license has been revoked by the regulator.

  • What happens to money already paid into your Plan?
  • Are you still liable for your outstanding debts?
  • Can you start a new Debt Management Plan?
  • What alternative options do you have?

Has your DMP Company gone bust? Give us a call on 0800 077 6180 or complete the form below to get advice from one of our experts

What happens to the money you paid to the Debt Management Company?

If your Debt Management Company stops trading you should not have to worry about the money you have already paid into your Plan. This should have been distributed to your creditors in accordance to the terms of your agreement.

Debt Management companies are regulated by the Financial Conduct Authority (FCA). The FCA states that any money paid into your plan should be distributed to your creditors within 5 working days (CASS 11.10.2).

Because of this you should not suffer any financial loss. The balance of your outstanding debts should be no different to what they would have been if the company was still managing them .

As soon as you learn that your debt management company has stopped trading you should stop making any further payments to them. Cancel your standing order. You will need to make new arrangements to pay your debts from now on.

Are you still liable to pay your Outstanding Debts?

Even though your debt management company has stopped trading you are still responsible for your outstanding debts. The company you were working with did not pay off the debt you owe. You remain personally liable for the outstanding balances.

You should have a good idea of how much you still owe to your creditors from the last statement you received from your debt management company. They should have been sending you one of these at least once a year.

If you are unsure how much you still owe each of your creditors the best thing to do is contact them and ask. You can then explain the situation and that you are putting a plan in place to continue paying them.

Can you start a new Debt Management Plan?

One of your options if your Debt Management Company goes bust is to start a new Debt Management Plan. There are various different organisations and companies that can help you do this.

You can chose to work with a new commercial Debt Management Company if you wish. They will charge you a fee each month for managing your Plan. Alternatively you could consider using a debt charity who will manage the agreement for free. There are advantages and disadvantages with each of these options.

If you wish there is nothing to stop you starting your own Plan. This will involve managing the payments to your creditors yourself.

Before you start your own debt management plan you must be confident that you will be able to manage the multiple payments on time. You will also need to undertake any ongoing negotiations with your creditors yourself.

What alternative Debt Solutions can you consider?

Before rushing to set up a new debt management plan it is always worth taking the time to consider the alternative debt solutions which are available to you.

When you started your old debt management plan you may not have been told about all of the different debt solutions. Alternatively your circumstances may now have changed. As such a different option may now be more suitable.

One alternative you should consider is an Individual Voluntary Arrangement (IVA). Once in place all interest and charges are stopped by law. In addition the Arrangement may lead to a considerable amount of your debt being written off.

You could also consider the options of a Debt Relief Order or Bankruptcy. If you are not a home owner these solutions could help you become debt free far faster than either a debt management plan or IVA. They are also suitable if the amount you can afford to pay towards your debts is very small.

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